Despite a decline in goods exports in recent months, the Indian manufacturing sector remains bullish on its near term growth outlook, a quarterly survey conducted by apex industry chamber Federation of Indian Chambers of Commerce and Industry (FICCI) suggests.
The positive sentiments are largely driven by growth in electronics, capital goods, construction machinery, auto and auto component manufacturing sectors, the survey indicates. "FICCI's latest quarterly survey on manufacturing reveals that sentiments remain positive for Indian manufacturing during the first quarter of 2023-24. The survey observed that after experiencing revival of the Indian economy in the FY 2021-22, momentum of growth has continued for the subsequent quarters as well. In the January to March period of FY 2022-23, 55% of the respondents reported higher production levels. Further, over 57% of the respondents expect a higher level of production in April to June period of FY24 with an average increase in production in single digits. This assessment is also reflective in order books as 58% of the respondents in Q1 of FY24 have had higher numbers of orders and demand conditions, especially domestic, continue to be optimistic in Q2 of FY24 as well," the survey notes.
The quarterly survey assessed the sentiments of manufacturers for Q1 of FY24 for nine major sectors namely automotive & auto components, capital goods & construction equipment, cement, chemicals fertilizers and pharmaceuticals, electronics & white goods, machine tools, metal & metal products, textiles, apparels & technical textiles, toys & handicrafts and miscellaneous products. Responses have been drawn from over 400 manufacturing units from both large and SME segments with a combined annual turnover of over ₹7.70 lakh crores. While growth expectation for the next three months was 'very strong' for the electronics and white goods sector, it was 'strong' for automotive and automotive components and capital goods and construction equipment. It was 'moderately strong' for cement and machine tools sectors and 'moderate' for chemicals, fertilizers and pharmaceuticals and toys and handicrafts. The expectations were 'moderately low' for metals and metal products and textiles, apparels and technical textiles.
In terms of capacity utilization, the existing average capacity utilization among the respondents of the survey in manufacturing is around 75%, the same as the previous quarter, an indication of sustained economic activity. The future investment outlook has improved as compared to the previous quarter as over 56% respondents reported plans for investments and expansions in the coming six months as against 47% in the previous quarter.
Hiring outlook looks positive as over 38% of the respondents said they are looking at hiring an additional workforce in the next three months.
However, the outlook for exports seems to be waning as about 30% of the respondents reported higher exports in Q4 of FY23 as compared to about 28% of the respondents expecting their exports to be higher in Q1 of FY24.