Manufacturing sector to witness higher growth in Q2: Survey

The Dollar Business Bureau 

The manufacturing sector in India may see a higher growth during the quarter of July-September supported by improvement in prospects of exports and domestic demand, though the outlook for hiring remains subdued, as per an industry body survey. 

The recent survey for the second quarter by Federation of Indian Chambers of Commerce and Industry (FICCI) on the manufacturing outlook finds out that the interest rate continued to remain high and sticky, paid by the manufacturers.

Uncertain economic environment, competition from imports, delayed clearances, unfavourable market conditions, cost escalation and inadequate infrastructure (especially availability of power) are some of the key constrictions affecting the industry’s expansion plans, the survey noted. 

Earlier, the survey had pointed to a slowdown in the Q1 of 2016-17, which now seems to be fading. 

The percentage of survey respondents who are expecting higher growth during the quarter has increased to 55 percent compared to 53 percent in the quarter of April-June 2016-17. However, it remains much lower than the 60 percent for the quarter of January-March in the previous financial year. 

India’s manufacturing sector continued with its positive growth and reached a four-month high in the month of July, supported by a stronger recovery in new business orders. 

The survey noted that the marginal improvement in the manufacturing production outlook in the second quarter of 2016-17 is due to several factors that included slightly better exports against the previous quarters, and improved outlook on the domestic front.

Export outlook for manufacturing improved marginally in the quarter of July-September as compared to the expectations for the previous quarter. The percentage of respondents expecting growth in exports in the 2nd quarter increased by 5 percentage points to 41 percent compared to 36 percent in 2016-17. 

The survey recorded the expectations of manufacturers in 13 key sectors that included auto, capital goods, chemicals, cement and ceramics, electricals & electronics, food products, footwear and leather, machine tools, metal forging, metal and metal products, paper products, textiles and technical textiles, and textiles machinery.