Manufacturing sector growth may slow down in Q2: Ficci

The manufacturing sector growth is expected to moderate in July-September period over the previous quarter due to the gradual phasing out of stimulus measures and increase in input cost, a survey by industry body Ficci has said.

"... (the survey) reveals that the growth of the Indian manufacturing sector is likely to moderate in the Q2 (July-September 2010) vis-à-vis the growth witnessed in Q1 (April-June 2010)," the survey of 342 companies across sectors like auto, textiles, metal, chemical, FMCG, among others said.

"Some slowdown is expected given the gradual phasing-out of monetary and fiscal stimulus and increase in raw material prices which could depress the demand through inflationary pressure," it said.

The manufacturing sector had grown by 15.1 per cent in the April-June quarter this fiscal.

The government has partially rolled back fiscal stimulus by raising excise duty in the Budget. The government had provided monetary and fiscal sops to the industry in three tranches from December 2008 to provide a cushion to the economy against global slowdown.

Participants said significant constraints faced by them include hardening of raw materials prices, inadequate availability of raw materials, shortage of skilled labour and power and uncertainty of economic environment.

About 80 per cent of the 342 companies surveyed said hardening of raw material prices would affect adversely their growth prospects, the survey said.

While sectors like automotive, tyres, consumer durables, and leather are expected to witness a strong growth of over 12 per cent in the second quarter, growth may be slowed down in segments like metals, capital goods, cement, FMCG and food.

Besides, sectors like textiles, pharmaceuticals and chemicals would continue to witness moderate growth as they are yet to fully utilise their capacity.

Only about 40 respondents said they were planning to add capacities in the next six months.  However, the survey said that the exports outlook is likely to be positive for the manufacturing sector.

"Almost all the sectors are expected to see growth in their exports during July-September period," it said.

The survey further said that the employment situation is expected to improve in the second quarter with most of the sectors planning to increase the workforce.