The outlook for the country’s manufacturing sector for the current fourth quarter (Q4) ending March 31 is positive, industry chamber Ficci said.
Ficci cited an increased percentage of its survey respondents reporting higher production in the ongoing quarter as compared to the previous one.
Releasing its latest quarterly survey on Indian manufacturing, Ficci said the positive outlook for the sector in the fourth quarter (January-March) has increased significantly to 55 per cent from 47 per cent in October-December 2017.
“This positive outlook is notable as Q-4 2017-18 witnessed the highest percentage of respondents (55 per cent) expecting higher production since Q-2 of 2016-17,” said a Ficci statement.
“The percentage of respondents reporting low production has also come down to 11 per cent in the fourth quarter from 15 per cent in Q3 of 2017-18.”
Ficci’s latest survey assessed the expectations of manufacturers for the current quarter in 12 major sectors while responses were drawn from over 300 units in large as well as small and medium (SME) segments, with a combined annual turnover of over Rs 3 lakh crore.
“In terms of order books, 51 per cent of the respondents in Q4 are expecting higher number of orders as against 42 per cent of Q3 which again is a sign of revival,” the survey said.
According to Ficci, there are “visible signs of revival in capital goods and improvement is seen in export outlook also”.
“The future investment outlook remains pessimistic as 64 per cent respondents reported that they are not planning any capacity additions for the next six months,” the industry body said.
“High raw material prices, low domestic and export demand, exchange rate appreciation, increasing imports, excess capacities and shortage of working capital finance are some of the major constraints which are affecting expansion plans of the respondents.”
Noting that overall capacity utilisation in manufacturing remains low, the survey reported that “the average capacity utilisation for the manufacturing sector is about 77 per cent for Q3 2017-18 which is similar to that of Q2”.
The outlook for exports is marginally positive as 47 per cent of the participants are expecting a rise in exports during the quarter in consideration.
“Rupee appreciation has also affected exports during Q3 as 80 per cent of the respondents reported that the exports were affected by upto 5 per cent due to rupee appreciation,” Ficci said.
“Hiring outlook for the sector remains subdued in the near future as 70 per cent of respondents mentioned that they are not likely to hire additional workforce in next three months.”
Reflecting the rising inflation, the survey reported that the cost of production as a percentage of sales “has risen significantly for 62 per cent respondents in Q3 2017-18.