You are here: Home » News-CM » Economy » News
Business Standard

Hiring and Production Outlook Improves in Manufacturing: FICCI Survey

Capital Market 

Export Outlook Continue to be Affected by Global Demand Factors

FICCI's latest Quarterly Survey on Manufacturing presents a better outlook for hiring and production in Manufacturing. The survey portrays a better outlook for the manufacturing sector in Q-3 (October-December 2018-19) as the percentage of respondents reporting higher production in third quarter were much higher than those reporting higher production in Q-3 of 2017-18. The proportion of respondents reporting higher output growth during the October-December 2018 quarter was 54% as compared to 47% in Q-3 of 2017-18. The percentage of respondents reporting low production was only 13.5% in Q-3 2018-19 as compared to 15% in Q-3 of 2017-18.

Similarly, on hiring front the outlook for the sector seems to have slightly improved for near future. While in Q-3 of 2017-18, 70% respondents mentioned that they were not likely to hire additional workforce, this percentage has come down to 65% for Q-3 of 2018-19. Going forward it is expected that hiring scenario will improve further, noted the Survey.

FICCI's latest quarterly survey assessed the sentiments of manufacturers for Q-3 (October-December 2018-19) for eleven major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, leather and footwear, metal & metal products, paper products, textiles, textile machinery and tyre. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over 2.2 lakh crore.

In terms of order books, 43% of the respondents in October-December 2018 are expecting higher number of orders against 42% in October-December 2017-18.


The outlook for exports is somewhat stable as 36% of the participants are expecting a rise in exports for Q-3 2018-19 and 32% are expecting exports to continue on same path as that of same quarter last year, observed the Survey. However, rupee depreciation has not led to any significant increase in exports as 78% of the respondents reported that the exports were not affected much by rupee depreciation. Thereby, emphasizing that there were other global factors that are restricting the growth of our exports.

Source FICCI Survey

Capacity Utilization

However, the overall capacity utilization in manufacturing remains low at 75% in Q-3 2018-19. The average capacity utilization for the manufacturing sector in the last few quarters has been around 75% only as per the Survey. The future investment outlook, though moderate, is slightly better than that was perceived in Q-3 of 2017-18. 47% respondents reported plans for capacity additions for the next six months (46% in Q-3 of 2017-18).

High raw material prices, high cost of finance, uncertainty of demand, shortage of skilled labor, high imports, requirement of technology upgradation, excess capacities, delay in disbursements of state and central subsidies are some of the major constraints which are affecting expansion plans of the respondents.

In sectors like automotive, capital goods, leather and footwear and textiles machinery average capacity utilization has either increased or remained almost same in Q-3 of 2018-19 as compared to Q-2 2018-19. In sectors such as Chemicals, Fertilizers and Pharmaceuticals, Cement and Ceramics, Electronics & Electricals, Metals & Metal Products, Paper Products and Textiles the capacity utilization has fallen in Q-3 2018-19 vis-a-vis Q-2 2018-19.

Table: Current Average Capacity Utilization Levels as Reported in Survey (%)Sector Average Capacity Utilization in Q-3 2018-19 Average Capacity Utilization in Q-2 2018-19 Average Capacity Utilization in Q-4

2017-18 & Q-1 2018-19

Average Capacity Utilization in Q-3


Automotive 80 73 73 78Capital Goods 74 73 74 70Cement and Ceramics 60 70 70 73Chemicals, Fertilizers & Pharmaceuticals 74 82 84 78Electronics & Electricals 68 69 65 76Food Products NA 60 NA NALeather & Footwear 60 60 70 75Medical Devices and Technologies NA 70 NA NAMetals & Metal Products 74 86 75 81Paper Products 80 88 95 NATextiles 80 83 80 80Textiles Machinery 60 60 60 60*NA: Not available due to lack of data


86% of the respondents maintained either more or same level of inventory, which is slightly more as compared to 83% in the previous quarter but less than 90% as was the case in Q-3 of 2017-18. This has been due to low domestic and export demand.

Interest Rate

Average interest rate paid by the manufacturers has slightly increased to be 10.6% against 10.2% p.a. during last quarter but the highest rate being as high as 17%. The recent cut in repo rate by RBI shall come as a relief for the industry and it expects more reduction in the rates in coming months to drive investments.

Sectoral Growth

Based on expectations in different sectors, it is noted that high growth is expected in Capital Goods, Textiles and Automotive in Q-3 2018-19 whereas moderate growth is expected in Leather & Footwear, Metals and Metal Products, Paper Products, and Textile Machinery, Tyre and Electronics & Electricals sector. The growth also seems to be more broad-based compared to what it was in Q-3 of 2017-18.

Table: Growth expectations for Q-2 2018-19 compared with Q-2 2017-18Sector Growth ExpectationCapital Goods StrongTextiles StrongAutomotive StrongLeather & Footwear ModerateMetals and Metal Products ModeratePaper Products ModerateTextile Machinery ModerateTyre ModerateElectronics & Electricals ModerateChemicals, Fertilizers & Pharmaceuticals LowNote: Strong > 10%; 5% < Moderate < 10%; Low < 5%
Source: FICCI Survey

Production Cost

The cost of production as a percentage of sales for manufacturers in the survey has risen for 77% respondents. This, of course, is significantly higher than the percentage of 62% for Q-3 of 2017-18. This is primarily due to increased cost of raw materials, wages, power cost, rising crude oil prices, increase in finance cost and rupee depreciation.

Powered by Capital Market - Live News

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, February 11 2019. 14:44 IST