The growth momentum, which gained momentum in the April to June quarter and July to September quarter, is likely to be sustained for the next six to nine months, according to the quarterly survey by the Federation of Indian Chambers of Commerce & Industry (FICCI). The survey was conducted across 300 manufacturing units from both large and SME segments, with a combined annual turnover of over ₹2.8 lakh crore, for 10 major sectors namely automotive & auto Components, capital goods, cement, chemicals fertilisers and pharmaceuticals, electronics, machine tools, metal & metal products, paper products, textiles, textile machinery and miscellaneous. Of the 300 respondents, 61% reported higher production levels in the July-September quarter.

The existing average capacity utilisation in manufacturing is more than 70%. Of this, the utilisation capacity of paper products is highest at 95%, followed by the automotive sector and textile machinery at 90%, miscellaneous sectors at 80%, cement at 75%, capital goods at 73%, chemicals, fertilisers, and pharmaceuticals at 70%, textiles at 69%, machine tools at 68%, electronics at 65%, and metal and metal products at 64%.

In terms of capacity expansion, 40% of respondents have plans for capacity expansion in the next six months by as much as over 15% on average as compared to the September quarter of the previous fiscal year.

“Global economic uncertainty caused by the Russia-Ukraine war and increasing cases of various mutations of COVID virus worldwide has accentuated the volatilities impacting the major economies. High raw material prices, increased cost of finance, cumbersome regulations and clearances, shortage of working capital, high logistics cost due to rising fuel prices and blocked shipping lanes, low domestic and global demand, excess capacities due to the high volume of cheap imports into India, unstable market, high power tariff, shortage of skilled labour, highly volatile prices of certain metals etc. and other supply chain disruptions are some of the major constraints which are affecting expansion plans of the respondents,” the survey says.

Meanwhile, the survey says that the average interest rate paid by the manufacturers has also declined to 8.37% per annum in the July to September quarter as against 9.3% per annum during the last quarter. The highest rate at which the loans are currently raised stands at 13.5% per annum. Amongst the respondents, 62% have reported high lending rates.

In terms of sectoral growth, the 10 surveyed sectors are expected to register strong to moderate growth and export growth by over 42% in the July to September quarter of FY23 against the same period last year. However, the hiring outlook remains below potential as only 36% of the respondents in Q2 FY23 are planning to hire an additional workforce in the next three months.

Notably, the country’s manufacturing sector purchasing managers index (PMI) surged to 55.3 in October as compared to 55.1 in September. This is the 16th time that the country's manufacturing PMI has remained above the 50-mark. Meanwhile, the country’s input buying rose at the slowest pace in 14 months. Consumer goods were the brightest area of manufacturing in October, with firms signaling a rise in output, overall sales, and exports.

Manufacturing sector growth in India

Manufacturing growth to sustain for next 6-9 months: FICCI