New Delhi, (UNI) A survey across 12 major sectors including auto, capital goods, cement, chemicals and pharma has shown improved sentiments among manufacturers with average capacity utilisation in the range of 65-70% in the third quarter (Q3) of the current financial year. Manufacturers are expecting measures in the budget to enhance growth and investments in the sector.
“The percentage of respondents reporting higher production in third quarter of 2021-22 (October-December 2021-22) was around 63%. This was significantly higher or almost double than the similar percentage of last year’s Q-3 quarter (around 33%),” industry body Ficci said on Sunday. Industries generally go for expansion once at least 70% factory capacity is utilised.
Ficci said that its survey responses were drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over 2.7 lakh crore. Those participating in the survey flagged cost of doing business as a cause for concern for the sector.
“High raw material prices, high cost of finance, uncertainty of demand, shortage of working capital, high logistics cost, low domestic and global demand due to supply chain disruptions, excess capacities due to high volume of cheap imports into India, unstable market, high power tariff, are some of the major constraints which are affecting expansion plans of the respondents,” the industry body said. The survey revealed that cost of production as a percentage of sales for manufacturers had risen for 81% respondents.
The outlook for exports continues to indicate the expansion path as around 50% of the participants expected a rise in their exports for October-December period. Hiring outlook for the manufacturing sector, however, remains subdued as around 75% of the respondents in the survey said that they were not likely to hire additional workforce in the next three months.
As per the survey, majority of the manufacturers are yet to see reduction in interest rate in line with repo rate cuts by Reserve Bank of India (RBI) over the last few months. “Average interest rate paid by the manufacturers has reduced slightly to 8.4% per annum as against 8.7% during last quarter and the highest rate remains as high as 15%,” the Ficci survey found.