A survey by FICCI said that the cost of doing business in India remains a matter of concern.
New Delhi:
According to a survey by industry body FICCI, the overall outlook for the country’s manufacturing sector has shown improvement in the third quarter of the current fiscal, though cost of doing business remains a cause for concern and hiring prospects remain low.
Findings from the latest quarterly survey on manufacturing, released on Sunday, also show continued economic activity in the sector, with the current average capacity utilization between 65 and 70 percent.
FICCI noted that the percentage of respondents reporting higher production in the third quarter of 2021-22 (October-December 2021-22) was around 63 per cent, almost double the year-ago period (about 33 per cent).
This assessment is also reflected in the order book as 61 per cent of the respondents had a higher number of orders in October-December 2021-22 than in July-September 2021-22, the survey found.
Rising raw material prices, high cost of finance, demand uncertainty, working capital constraints, high logistics cost, low domestic and global demand due to supply chain disruptions are some of the major constraints affecting the expansion plans of the respondents. Said it.
The survey assessed the performance and sentiments of manufacturers for the third quarter across 12 key sectors such as automotive, capital goods, cement, chemicals, fertilizers and pharmaceuticals, electronics and electricals and medical devices.
Feedbacks have been drawn from over 300 manufacturing units from both large and small and medium enterprises sectors with a combined annual turnover of over Rs 2.7 lakh crore.
Almost half of the participants expect their exports to increase in the third quarter of 2021-22 as compared to the corresponding quarter of the previous year.
“The hiring outlook for the manufacturing sector remains weak as nearly 75 per cent of the respondents mentioned that they are unlikely to hire additional workforce in the next three months,” Ficci said in the survey.
However, the average interest rate paid by manufacturers has come down slightly to 8.4 per cent per annum from 8.7 per cent in the previous quarter and the highest rate remains at 15 per cent. This highlights that the repo rate cut by the RBI over the past few months has not resulted in a proportionate reduction in the lending rate, as reported by nearly 60 per cent of the respondents.
High raw material prices, rising transportation and logistics costs, and rising prices of diesel, LPG, natural gas, electricity and fuel have been the main contributors to the rising cost of production.
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