Manufacturing growth accelerated in July-September for ten major sectors and is likely to continue for subsequent quarters in financial year 2023-24 (FY24) as well despite slowdown in developed nations, as per the latest ‘Quarterly Survey on Indian Manufacturing Sector’ released by the Federation of Indian Chambers of Commerce & Industry (FICCI) on Monday.
Over 79 per cent of the respondents shared a higher level of production in Q2 FY24 and the average capacity utilisation rate was higher at 74 per cent in Q2 as against 73 per cent in previous quarters, the survey said. It, however, listed “demand” as the major constraint and limiting factor, with over 40 per cent respondents highlighting this as a significant constraint.
“The existing average capacity utilisation in manufacturing is around 74 per cent, which reflects a sustained economic activity in the sector. This is slightly higher than 73 per cent capacity utilisation reported for previous quarters. The future investment outlook has also improved as compared to the previous quarter as over 57 per cent respondents reported plans for investments and expansions in the coming six months. This is also a slight improvement over the previous survey,” the survey added.
The demand has turned out to be the major constraint and limiting factor to realise the true potential of the manufacturing sector in India. “Whether it is domestic demand or exports, this remains a major limiting factor.
Some other constraints, though not major ones, are high raw material prices, increased cost of finance, logistics, and other supply chain disruptions are some of the major constraints which are affecting expansion plans of the respondents,” it said.
The survey conducted across ten sectors — automotive and auto components; capital goods and construction equipment; cement; chemicals, fertilisers and pharmaceuticals; electronics and white goods; machine tools; metal and metal products; textiles, apparels and technical textiles; paper; and miscellaneous — covered over 380 manufacturing units from both large and small and medium enterprises with a combined annual turnover of over Rs 4.88 lakh crore. 80 per cent of the respondents in Q2FY24 had a higher number of orders, while 85 per cent of the respondents had either more or the same level of inventory in Q2. In exports, over 48 per cent of the respondents reported higher exports in Q2 compared with 33 per cent in Q1FY24. “However, further improvement in export demand is required in the light of the country’s growth aspirations,” it said.
On the hiring outlook, 38 per cent of the respondents are looking at hiring additional workforce in next three months. Electronics and white goods; cement; automotive and machine tools were outperformers, whereas sectors like capital goods and construction machinery, chemicals, textiles, metals, paper and other sectors displayed moderate growth.