FICCI Survey Shows India's Manufacturing Business Sentiments Remain Positive in Q-3 And Q-4

FICCIs latest Quarterly Survey on Manufacturing (QSM), which is the 61st edition of the survey, reveals a sustained and continued period of growth for Indias manufacturing sector in the last two quarters of FY 2024. Compared to the previous quarter, Q3 FY 24, when 73% respondents had reported higher production levels, in the current Q4 FY 2024, around 87% respondents expect either higher or same level of production.

This upbeat assessment of Indias manufacturing is also reflected in higher order books. 85% of the respondents in Q4 FY 2024 are expecting higher number of orders compared to the previous quarter. Domestic demand conditions show optimism in the current Q4 2024.

The existing average capacity utilization in manufacturing is around 73%, which reflects sustained economic activity in the sector, which is more or less same as reported in previous surveys. The future investment outlook also looks steady, with over 50% of respondents indicating plans for investments and expansions in the next six months.

88% of the respondents had either more or same level of inventory in Q3 Oct-Dec FY 24, which is more than that in same quarter last year. In Q4 Jan-Mar FY 24, about 84% of the respondents are expecting higher or same level of inventory.

In exports, about 31% respondents reported higher exports in Q3 2023-24. Furthermore, over 40% of the respondents expect their exports to be higher in Q4 2023-24 as compared to the previous years similar quarters.

The hiring outlook remains stable as close to 40% of the respondents are looking at hiring additional workforce in the next three months.

Average interest rate paid by the manufacturers has been reported to be 9.3%. A little under 45% of the respondents reported that the increase in repo rates in the last few months has led to a slight increase in the lending rate by their banks, thereby increasing their cost of borrowing. Close to 90% of respondents reported sufficient availability of funds from banks- for working capital or long-term capital.

Production cost seems to have increased for manufacturers in Q3 2023-24. The cost of production as a percentage of sales for manufacturers in the QSM has risen for 67% respondents, which is slightly more than which was reported in the survey for previous quarter.

Increase in price of raw material, utilities, labour cost, freight charges, increase in borrowing cost due to high interest rate and supply chain disruption have been the main contributors to increasing cost of production. Other factors responsible for escalating production costs include high cost of carrying inventory, etc.

Many sectors have sufficient labor force engaged in their operations and are not facing shortage of labor at factories. 62% of respondents mentioned that they do not have any issues with workforce availability, the remaining 38% feel that there is still a lack of skilled workforce in their sectors.

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