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Amid manufacturing likely to contract for the first time in 2013-14 in over two decades, a survey by the Federation of Indian Chambers of Commerce and Industry (Ficci) has found the outlook for the factory production improving a bit in the fourth quarter over the previous quarter of the year.
The survey, released today, showed that 56% of respondents expect higher level of production in the fourth quarter year-on-year against 52% in the third quarter and 48% in the second quarter. This was the highest proportion of respondents exhibiting confidence on improved production year-on-year in the last eight quarters, the survey showed.
However, the chamber still did not call it a recovery since it is not broad-based and because investment is likely to remain subdued.
Upturn in manufacturing is particularly evident in sectors like leather, textiles and chemicals. At the same time, sectors like automotive, capital goods and electronics are expected to witness sluggish growth in the current quarter.
Based on expectations in different sectors, the survey pointed out that seven out of 14 sectors were likely to witness low growth --less than 5%. Only two sectors namely, leather and textiles-- are expected to have a strong growth of over 10% in January-March 2013-14 and rest all the sectors are likely to witness moderate growth.
Export outlook for manufacturing remains positive and seems to have improved somewhat in the fourth quarter as the proportion of respondents expecting higher exports improved to 58% as compared to 48% in previous quarter (q-3).
Over 70% of the respondents are not likely to hire additional work force in next three months. Though this proportion is less than that of the previous quarter (75%), overall the manufacturing units are not expected to add significantly to their existing work force in coming months.
The demand condition seems to be unchanged with 44% respondents reporting higher order books for January-March quarter in 2013-14, which was the same in the previous quarter as well.
Investment is projected to remain subdued in manufacturing sector as 71% respondents in the fourth quarter said they do not have any plans for capacity additions for the next six months against 72% in the third quarter.
Interest rates paid by the manufacturers range from 8 to 16% as per the survey with average interest rate at around 11% per annum. As many as 72% respondents are availing credit at over 11%, as RBI continued with its hawkish stance.
Manufacturing was officially estimated to shrink 0.2% in 2013-14 against 1.1% growth in 2012-13. Before this, value of output of factory production contracted 2.4% in 1991-92.
FICCI's latest quarterly survey gauges the expectations of manufacturers for 14 fourteen major sectors. Responses have been drawn from 330 manufacturing units and associations from both large and SME segments with a combined annual turnover of over Rs 5 lakh crore.
| Respondents expecting higher production (YoY) | |
| Q1, 2012-13 | 46% |
| Q2, 2012-13 | 44% |
| Q3, 2012-13 | 45% |
| Q4, 2012-13 | 36% |
| Q1, 2013-14 | 35% |
| Q2, 2013-14 | 48% |
| Q3, 2013-14 | 52% |
| Q4, 2013-14 | 56% |
| Source : FICCI Survey | |
