Ficci survey paints dismal picture of manufacturing activity

About 75% said they weren't likely to hire additional workers current quarter, against 70% in previous quarter

Compared to the quarter ended March, India Inc is less confident of the manufacturing sector recording a good performance this quarter, according to a survey by the Federation of Indian Chambers of Commerce and Industry (Ficci). However, the confidence is much higher compared to a year ago.

Half of those surveyed expected higher production by manufacturing companies during the current quarter, compared to a year ago. The number stood at 56% during the March quarter and just 35% in the first quarter of 2013-14.

About 75% of the respondents said they weren't likely to hire additional workers during the current quarter, against 70% in the previous quarter. "Overall, manufacturing units are not expected to add significantly to their existing workforce in the coming months," Ficci said in a statement.

The survey was conducted to gauge the expectations of manufacturers across 14 sectors---textiles, capital goods, metals, chemicals, cement, electronics, automobiles, leather & footwear, machine tools, food processing, paper, tyres, etc. Responses were drawn from representatives of 352 manufacturing units, both large and small and medium segments, with a combined annual turnover of about Rs 3.75 lakh crore.

Subdued manufacturing activities were also reflected in the order books of these companies. While 44% respondents had reported higher order books for the March quarter in the last survey, only 36% of those surveyed this time expected higher order books for the current quarter.

"This time, it is not just domestic factors, but, more importantly, the export front, for which the outlook seems to be weakening. Due to this, manufacturing growth is likely to be pulled down," Ficci said.

The proportion of respondents expecting higher exports during this quarter stood at 36%, against 58% in the previous quarter.

Manufacturers remained subdued on the investment front, too. For this quarter, 69% of the respondents, against 71% in the previous quarter, said they didn't have any plan for capacity additions in the next six months. "This could hardly be construed as an upturn in investment activity, as of now," the chamber said.

In many sectors, average capacity utilisation in the March quarter was the same as in the quarter ended December 2013. These sectors include capital goods, chemicals, metals, textiles machinery, leather & footwear and paper.

In the automobile sector, capacity utilisation improved slightly---from 70% in the December 2013 quarter to 73% in the quarter ended March this year.