There has been acceleration in manufacturing in the second quarter and it is likely to sustain in FY24: Survey by FICCI
As per a survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), the growth of the manufacturing sector accelerated in the June-September quarter, and it is likely to continue in the rest of 2023-24 despite the slowdown of developed nations. It also stated that around 79% of respondents reported a higher production level in the second quarter of FY24.
The organisation surveyed 380 manufacturing units covering large Small and Medium Enterprises (SMEs) with a combined annual turnover of over Rs. 4.9 trillion (US$ 58.83 billion) in ten major sectors like automotive and auto components, capital goods, cement, and chemicals.
In the manufacturing industry, the average capacity utilisation was over 74% in the second quarter of FY24 which reflected sustained economic activity in the sector. It is comparatively higher than 73% capacity utilisation in the previous quarters.
The report also mentioned that there has been improvement in the future investment outlook as compared to the previous quarter as over 57% of respondents mentioned plans for investments and expansions in the coming six months.
It further stated that electronics and white goods, cement, and automotive and machine tools displayed strong growth and are "clear outperformers", whereas sectors like capital goods and construction machinery, chemicals, textiles, metals, paper and other sectors had moderate growth.
Over 40% respondents of the survey stated that demand is a significant constraint despite exports performing better than the previous quarters. More than 42 respondents mentioned higher exports in the second quarter as compared to 33% in the first quarter. Other constraints were high raw material prices, increased costs of finance, logistics, and other supply chain disruptions.
Around 38% of the respondents are considering hiring additional workforce in the next three months, but 18% of them feel that manufacturing lacks a skilled workforce. As many as 58% of manufacturers stated, in the second quarter that the cost of production as a percentage of sales increased, compared to 77% of respondents saying the same for the previous quarter.
The survey also considered high raw material prices and high energy costs are two main factors that contributing to the higher production costs.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.