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

Outlook for Manufacturing Improves for Quarter 4 of 2017-18: FICCI Survey

Capital Market 

FICCI's latest quarterly survey on expect positive outlook for the sector in Q-4 (January-March 2017-18) as the percentage of respondents reporting higher production in fourth quarter has increased significantly vis-?-vis previous quarter of 2017-18. The proportion of respondents reporting higher output growth during the Q-4 2017-18 has increased significantly to 55% from 47% in Q-3.

This positive outlook is notable as Q-4 2017-18 witnessed the highest percentage of respondents (55%) expecting higher production since Q-2 of 2016-17, observed FICCI Survey. The percentage of respondents reporting low production has also come down to 11% in fourth quarter from 15% in Q-3 of 2017-18.

Quarter % of Respondents Expecting Higher Production in the Quarter vis-?-vis Respective Last Year's QuarterQ-4 (2017-18) 55%Q-3 (2017-18) 47%Q-2 (2017-18) 50%Q-1 (2017-18) 49%Q-4 (2016-17) 47%Q-3 (2016-17) 48%Q-2 (2016-17) 55%Q-1 (2016-17) 53%Q-4 (2015-16) 60%Q-3 (2015-16) 55%Q-2 (2015-16) 63%Q-1 (2015-16) 44%Q-4 (2014-15) 52%Q-3 (2014-15) 50%Q-2 (2014-15) 62%Q-1 (2014-15) 50%Q-4 (2013-14) 56%Q-3 (2013-14) 52%Q-2 (2013-14) 48%Q-1 (2013-14) 35%Q-4 (2012-13) 36%Q-3 (2012-13) 45%Q-2 (2012-13) 44%Q-1 (2012-13) 46%Q-4 (2011-12) 36%

Source: FICCI Survey

FICCI's latest quarterly survey assessed the expectations of manufacturers for Q-4 (January-March 2017-18) for twelve sectors namely automotive, capital goods, and ceramics, and pharmaceuticals, & electricals, food products, leather and footwear, machine tools, & products, paper products, textiles and Responses have been drawn from over 300 units from both large and SME segments with a combined annual turnover of over Rs 3 lac crore.

In terms of order books, 51% of the respondents in Q-4 (January-March, 2017-18) are expecting higher number of orders as against 42% of Q3 2017-18 which again is a sign of revival.

Capacity Addition & Utilization

Though capital good has shown visible signs of revival, the future investment outlook remains pessimistic as 64% respondents in Q-3 2017-18 reported that they are not planning any capacity additions for the next six months. High raw material prices, low domestic and export demand, exchange rate appreciation, increasing imports, excess capacities and shortage of working are some of the constraints which are affecting expansion plans of the respondents. Overall in manufacturing remains low. The average for the is about 77% for Q-3 2017-18 as reported in the survey which is similar to that of Q-2 2017-18.

In some sectors like & electricals, automotive, capital goods, textiles, textiles machinery, leather & footwear, & and machine tools, average has either increased or remained almost same in Q-3 of 2017-18.

Table: Current Average Capacity Utilization Levels As Reported in Survey (%)

Sector Average Capacity Utilisation in Q-3

2017-18

Average Capacity Utilisation in Q-2

2017-18

Average Capacity Utilisation in Q-1

2017-18

Automotive 78 79 78Capital Goods 70 70 70Cement and Ceramics 73 75 75Chemicals & 78 79 76Electronics & Electricals 76 70 68Food Products NA 78 NALeather & Footwear 75 55 55Machine Tools 80 80 80Metals & 81 80 76Paper Products 80 88 80Textiles Machinery 60 50 60Textiles 80 80 82

*NA: Not available due to lack of sufficient data

Inventories

Inventory scenario has not changed much in 2017-18. In third quarter, 90% of the respondents have reported that they have maintained either more or same level of inventory which is similar to that of previous quarters.

Exports

The outlook for exports seems marginally positive as 47% of the participants are expecting a rise in the exports for Q-4 and 34% are expecting the exports to continue on same path as that of same quarter last year. Rupee appreciation has also affected exports during Q-3 2017-18 as 80% of the respondents reported that the exports were affected by upto 5% due to rupee appreciation.

Hiring

Hiring outlook for the sector remains subdued though better than last quarters, in near future as 70% of the respondents mentioned that they are not likely to hire additional workforce in next three months. This proportion has declined as compared to the previous quarter where 85% of the respondents were not in favour of hiring additional workforce.

Interest Rate

Average interest rate paid by the manufacturers has remained same as that of previous quarter standing at 11% p.a. but the highest rate continues to be as high as 16% (increased by 1% over previous quarter).

Sectoral Growth

Based on expectations in different sectors, it is noted that high growth is expected in Automotive and Capital Goods for Q-4 2017-18. Moderate growth is expected in and Ceramics, & Pharmaceuticals, Leather & Footwear, Paper, Machine Tools, Metals and Metal Products,& Electricals and in Q-4 2017-18 whereas low growth is expected in Textile Machinery and Textiles sector.

Table: Growth expectations for Q-4 2017-18 compared with Q-4 2016-17

Sector Growth ExpectationTextile Machinery LowTextiles LowChemicals & ModerateMachine Tools ModerateFood Products ModerateCement and Ceramics ModerateMetals and ModerateElectronics & Electricals ModerateLeather & Footwear ModeratePaper Products ModerateAutomotive StrongCapital Goods Strong

Note: 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 significantly for 62% respondents in Q-3 2017-18. This is primarily due to increase in cost of raw materials, increased wages, power cost and higher GST rates on certain products.

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, March 12 2018. 17:01 IST
RECOMMENDED FOR YOU
RECOMMENDED FOR YOU