The manufacturing outlook for Q2 expected to improve, but the cost of doing business remains a concern: FICCI Survey

NEW DELHI: According to a study conducted by the industry lobby group Federation of Indian Chambers of Commerce and Industry (FICCI), the forecast for expanded industrial operations in the July-September quarter of the current fiscal is likely to improve significantly.

“In the second quarter of 2021-22 (July-September), the percentage of respondents reporting higher production was much above 50%, at roughly 61%. This was much higher than the same percentage in the second quarter of last year (around 24 per cent). “In Q2 of 2021-22, 39% of respondents forecast low or similar production,” according to the survey. Due to the interruption created by the second wave, the prognosis was gloomy in the first quarter.

Manufacturing capacity utilization reached 72 per cent in the third quarter of this year, indicating that the industry is on the mend. These findings come from FICCI’s most recent quarterly survey, which looked at manufacturers’ sentiments in eleven major sectors from July to September: automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, metal & metal products, paper products, textiles, textile machinery, toys, and miscellaneous.

The poll included approximately 300 manufacturing units from large and small businesses, with a combined yearly sales of nearly Rs 2.7 trillion. High raw material prices, high finance costs, demand uncertainty, a shortage of skilled labor and working capital, high logistics costs, excess capacity due to a high volume of cheap imports into India, an unstable market, and a high power tariff are some of the significant constraints limiting the expansion plans, according to industry respondents. Furthermore, due to the uncertainty and lockdowns enforced due to Covid-19, domestic and global demand has been low.

According to the poll, the cost of manufacturing as a proportion of sales for manufacturers in the study has risen for 80% of respondents in the second quarter. The prognosis appears to improve in exports, with roughly 58% of participants predicting an increase in outgoing shipments in the second quarter. Exports are expected to continue on the same path as they were in the same quarter in 2020-21, according to 30% of respondents.

The hiring prognosis remained gloomy, with more than two-thirds of respondents indicating that they will not hire extra workers in the next three months. Except for toys, other industries are predicted to witness moderate and robust growth in the 11-sector forecast.

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