India's manufacturing sector likely to witness robust growth in Q2: Survey

India's manufacturing sector output is expected to register robust growth in the July-September quarter on account of higher production even as the hiring outlook for the sector remains subdued, a survey said Thursday.

Moreover, half of the participants in the survey expect exports to rise in the second quarter.

The estimates are part of Ficci's latest quarterly survey which assessed the sentiments of manufacturers for the second quarter for twelve major sectors -- automotive, capital goods, cement and ceramics, chemicals, fertilisers and pharmaceuticals, electronics and electricals, food products, leather and footwear, medical devices and technologies, metal and metal products, paper products, textiles machinery and textiles.

 

Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 2.8 trillion.

A total of 61 per cent respondents said output will grow during July-September 2018 quarter from 49 per cent in April-June 2018, the survey said.

This is the highest percentage of respondents expecting higher production since Q2 of 2015-16 where 63 per cent of respondents expected higher production -- a 12-quarter high sentiment.

The percentage of respondents reporting low production decreased to 9 per cent in Q2 2018-19 from 13 per cent in Q1 of 2018-19.

However, rupee depreciation has not led to any significant increase in exports during the first quarter as 83 per cent of the respondents reported that shipments were not affected much by a weakening rupee.

According to the survey, high growth is expected in cement and ceramics, capital goods, automotive and medical devices and technologies in Q2 2018-19, whereas textiles, textile machinery, metal and metal products, electronics and electricals, chemicals, fertilisers and pharmaceuticals, food products and paper products may witness moderate growth.

"Hiring outlook for the sector remains subdued in near future as 65 per cent of the respondents mentioned that they are not likely to hire additional workforce in next three months," said the survey.

Besides, average interest rate paid by the manufacturers has remained same vis-a-vis the last quarter standing at 10.2 per cent per annum but the highest rate continues to be as high as 15 per cent.

However, the cost of production as a percentage of sales for manufacturers in the survey has risen for 71 per cent respondents. This is primarily due to increased cost of raw materials, wages, power cost and rupee depreciation, it said.