New Delhi: According to a survey of the manufacturing sector conducted by an industry body, the manufacturing sector in the country has maintained the growth momentum during January to June period this year after witnessing a revival during the April-December period when the economy was hit by two Covid waves last year. The survey showed that there was an improvement in hiring activity in the manufacturing sector after a long gap as more than half of the companies surveyed reported that they were hiring.
According to the latest quarterly survey conducted by industry body FICCI, 55 percent of the respondents reported higher production during the first quarter of this financial year (April-June period), with an average expectation of an increase in production by over 10 percent. This is a much better improvement in the production which was reported during the same period last year.
Moreover, the hiring outlook has improved considerably during the last six months as just 25 percent of the manufacturing companies that participated in the survey were looking to hire people during October-December 2022 period. Whereas, the number of participating companies that were looking to hire people in the next three months, more than doubled to 53 percent in the April-June period this year.
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The survey also noted more than half of the respondent companies reported higher-order books from April-June this year. The latest manufacturing sector survey covered 12 major sectors namely automotive, capital goods, cement, chemicals, fertilizers and pharmaceuticals, footwear, machine tools, metal and metal products, paper products, textiles, toys, tyres, and miscellaneous. The survey covered more than 300 manufacturing units from both large and SME segments with a combined annual turnover of over 3 lakh crores.
Improved capacity utilization
Better capacity utilization, which is a clear indicator of improved economic activity, has marginally improved to 77 percent in the April-June period as against 75 percent during the preceding quarter. The future investment outlook also improved as against the previous quarter but remains that of cautious optimism as 40% of respondents reported plans for capacity additions in the next six months.
Russia-Ukraine war a dampener
However, the global economic uncertainty caused by the Russia-Ukraine war and increasing numbers of new Covid infections in several countries, including India, have highlighted the risky road ahead.
Raw material cost a constraint for growth
Energy and other commodity prices are at a fresh high due to the supply disruptions caused by the war in Europe. Increased raw material costs, increased cost of finance, cumbersome regulations, and clearances, shortage of working capital, high logistics costs, and blocked shipping lanes are some of the factors that are affecting the growth. In the case of Indian manufacturing companies, low domestic and global demand, excess capacity due to high volume of cheap imports, unstable market, high power tariff and shortage of skilled labor are affecting the economic revival. These factors coupled with volatile prices of certain metals and other supply chain disruptions are affecting the expansion plans of manufacturing companies in India, the survey noted.
