Manufacturing is expected to pick pace in the country in the second quarter buoyed by increase in exports and improved domestic demand, according to a survey done by apex industry chamber FICCI. “FICCI’s latest quarterly survey on manufacturing suggests a mild improvement in manufacturing sector’s growth in the ongoing second quarter of the fiscal, with a slightly better outlook for production. The survey had earlier indicated a slowdown of the first quarter of 2016-17, which seems to be waning,” said the chamber.
The proportion of respondents expecting higher growth during the July-September quarter has risen to 55 per cent as against 53 per cent for April-June quarter 2016-17, said FICCI. However, it remains much below the percentage of 60 per cent for January – March quarter of the previous fiscal, it said. “The slight improvement in the outlook for manufacturing production in second quarter of the current financial year is attributable to various factors including somewhat better outlook for exports compared to previous quarters, and better outlook on domestic demand front too,” said FICCI.
In terms of order books, almost half (49 per cent) respondents reported higher order books for the quarter July- September 2016-17 which is more than that of the previous quarter (38 per cent), said the chamber. The proportion of respondents expecting higher exports in the second quarter 2016-17 rose by 5 percentage points to 41 per cent. FICCI said that milder improvement for the quarter gets reflected in terms of investment as for Q2 2016-17, 73 per cent respondents as against 75 per cent respondents in previous quarter reported that they don’t have any plans for capacity additions for the next six months. “Though the proportion standing against expansion plans is still considerably high but is comparatively lower on a quarter-on-quarter basis. The higher percentage implies slack in the private sector investments in manufacturing is here to continue,”said the chamber.
It said that uncertain economic environment, unfavourable market conditions, competition from imports, delayed clearances, inadequate infrastructure (power) and cost escalation are some of the major constraints which are affecting the expansion plans of the respondents. The survey found that in some sectors, average capacity utilisation has almost remained the same in Q1 2016-17 as was in Q1 2015-16. The electronics and electricals sector, though, recorded a dip in the average capacity utilisation over the same period.
Exports to UK on the rise:
Indian engineering exports to UK defied Brexit fears by jumping 12 per cent in July. “The sentiment hit by Britain’s decision to leave the European Union has not come in the way of India’s engineering exports to UK and other two big markets of Germany and France, as these destinations defied the general declining trend, giving positive growth to the manufacturing and high-tech exports,” said Engineering Export Promotion Council of India (EEPC).
Engineering exports to Britain went up by over 12 per cent to $215 million in July, 2016 from $192 million in the same month of the previous year. “Shipments to Germany were even better close to $200 million, rising by over 19 per cent year on year from $168 million in July, 2015. “Exports to another key market, France were moderately higher by 2.29 per cent,” said EEPC. It said that engineering exports to UK are in line with the trend of the Britain’s economy defying concerns around the June 23 referendum in that country. “A quick decision on the change of the PM helped calm the nerves,” EEPC chairman T.S. Bhasin said.