The impact of manufacturing done in the July-September quarter on the sector's recovery is expected to be better than the previous quarter, notwithstanding the dampened hiring outlook for the segment, says Industry body FICCI's latest quarterly survey on manufacturing. The survey predicts recovery of the manufacturing sector in the second quarter ended September as compared to the previous quarter, with a rise in percentage of respondents reporting higher production. The proportion of respondents reporting higher output during July-September rose to 24 per cent, as compared to 10 per cent in the previous quarter.
The hiring outlook for the sector however, although improving slightly, is expected to continue being dormant as 80 per cent of the respondents mentioned that they are not likely to hire additional workforce in the next three months.
“This presents slightly improved situation in the hiring scenario as compared to the previous quarter Q-1 of 2020-21, where 85 per cent of the respondents were not in favour of hiring additional workforce,” FICCI said.
Also, the average interest rate paid by manufacturers has reduced to 9.2 per cent per annum as against 9.4 per cent per annum during the last quarter and the highest rate is reported to be 12.5 per cent. The recent cuts in repo rate by the RBI have not led to a consequential reduction in the lending rate as reported by 55 per cent of the respondents, the survey found. It covered wide areas of relevance for manufacturing like exports, capacity utilization, ongoing restrictions, availability of labour/workforce and others. In many of these areas there are signs of operations limping back to normal and in coming months could see better performance.
The survey assessed the sentiments of manufacturers for July-September 2020-21 for 12 major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, leather and footwear, medical devices, metal & metal products, paper products, textiles, textile machinery, and miscellaneous. Responses were drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of around Rs 3 lakh crore. The survey showed that overall capacity utilization in manufacturing has risen to 65 per cent as compared to 61.5 per cent in Q4 2019-20.
