73% manufacturers say no fresh hires for next three months: Ficci Survey

Optimism regarding rising production drops to less than 50%, showed the survey

India Inc remains averse to hiring in the near term as doubts over the revival of manufacturing sector continues to loom large, stated a recent survey conducted by the Federation of Indian Chambers of Commerce and Industry (Ficci).

Released on Monday, the quarterly survey on manufacturing showed that a staggering 73 per cent of respondents said they are unlikely to hire additional workforce over the next three months. This was mildly lower than the 77 per cent of respondents, showing a similar concern earlier.

Slow hiring may put more pressure on the market even as job losses continue to be a major concern in the post-demonetisation era. According to another recent study, the government's demonetisation exercise is estimated to have wiped away around 1.5 million jobs.

Earlier in the month, the new survey data put out by the Centre for Monitoring Indian Economy (CMIE) showed that while the country's employed force grew from 401 million in April 2016 to 406.5 million in December 2016, it fell to 405 million in the four-month survey period of January through April, this year.

The Ficci survey comes at a time when less than half of all respondents expect production to go up in the next 3 months. Only 49 per cent of respondents remained optimistic of production rising. In a previous survey conducted during the January-March quarter of FY17, around 48 per cent respondents aired similar concerns.

Ficci's latest quarterly survey assessed the expectations of manufacturers for the first quarter of FY18. Views were taken for eleven major sectors including auto, capital goods, cement and ceramics, chemicals and electronics & electricals, among others.

It had responses from over 300 companies, with a combined annual turnover of Rs 3.5 lakh crore from a wide array of sectors.

Production expectations may be low on account of the stagnating order books. About 47 per cent of respondents in the latest survey reported higher order numbers, which is almost the same as recorded in the previous quarter.

Incidences of rising cost of production have grown sharply as 69 per cent of firms noted it was a reason to worry in the latest survey. The corresponding figures for the previous survey stood at 60 per cent. This is primarily due to rise in minimum wages and raw material cost.

Firms reporting negative growth have come down to 17 per cent, from 27 per cent in the previous survey.

However, average capacity utilisation remains unchanged at 75 per cent for manufacturing units. Idle capacity has hit future investment outlooks that had already been weak.

About 74 per cent of respondents, as against the earlier figure of 75 per cent, reported that they don't have any plans for capacity additions for the next six months.

"High percentage implies slack in private sector investments in manufacturing, which is likely to continue for a few more months. Large volumes of imports, under-utilised capacities and lower domestic demand from industrial sectors and OEMs are some of the major constraints that are affecting the expansion plans of the respondents.", the survey noted.

Views on export outlook witnessed a marginal improvement as the percentage of respondents expecting a fall in exports during the first quarter of FY18 came down to 18.5 per cent, from 22.8 per cent in Q4 in the previous financial year.