FICCI forecasts slight upturn in Q2 manufacturing

Industry body FICCI Sunday forecast a slight upturn for the manufacturing sector in the second quarter of the current fiscal.

"Recent initiatives of the government to remove supply bottlenecks by clearing some of the large projects are perhaps reflected in the higher growth expectation for manufacturing sector in quarter two of 2013-14," the Federation of Indian Chambers of Commerce and Industry said in its latest quarterly survey.

A total of 47 percent of the 276 manufacturing units and associations taking part in the survey expected a slight upturn in manufacturing activity in the second quarter.

"The proportion of respondents who expect to report higher levels of production in the second quarter of 2013-14 has improved to 47 percent as compared to over 35 percent in the first quarter," the survey said.

Also, the proportion of surveyed people expecting any fall in production level has reduced to 16 percent as compared to 26 percent in the last quarter.

The survey said that upturn in the industrial sector was particularly evident in sectors like leather, textiles, cement and chemicals.

Demand conditions, however, remain subdued as only 32 percent respondents reported higher order books for July-September 2013 vis-a-vis April-June 2013, it said.

The survey said that "slight improvement in export outlook is possible due to some revival of demand in US and Japan and also due to impact of rupee depreciation".

However, it said, exporters were not able to leverage the opportunity because high import content compensates for any gain from rupee depreciation.

Besides, it said, the rupee depreciation has impacted the raw-material cost of manufacturing units.

"On an average, rupee depreciation has increased input cost by 11 percent for manufacturers," it said.

It said majority of respondents felt they were not likely to hire new workers in the next three months.

The survey has gauged the expectation of manufacturers for second quarter for 12 major sectors like textiles, capital goods, cements, electronics and chemicals.

Capacity utilisation in manufacturing remains subdued as in the first quarter with 74 percent respondents not having any plans for adding capacity for the next six months.