The manufacturing sector is expected to register lower growth during July-September quarter compared to previous quarters, mainly due to the rupee depreciation and slowdown in demand, a survey by industry body Ficci said.
Rupee depreciation has presumably affected the sector’s competitiveness severely over the last few months, the Ficci’s quarterly survey on manufacturing said.
According to the survey, which drew responses from 418 manufacturing units and associations, 46 per cent respondents expects that the sector’s growth would be low in the second quarter of this fiscal.
The manufacturing sector which constitutes over 75 percent of the factory output, did not perform well as it grew a meagre 2.5 percent, as against 6.3 percent in May, 2011.
Over 67 percent respondents said they were affected by rupee depreciation in the last few months. “Rupee depreciation has led to increased cost of their imported raw materials and inputs by 5-25 percent in last few months,” it said.
Sectors which have been affected more by the depreciation are automotive, electronics, capital goods, chemicals and textiles.
As against this, only 42 percent respondents said the depreciation has helped in improving their exports.
“The demand conditions remained subdued in the economy for the manufacturing sector in Q2 compared to previous quarters,” it said.
The survey also said capacity utilisation in Q2 has remained low. During the July-September quarter, only 35 percent respondents reported that their capacity utilisation was higher than last year compared to 44 percent reporting so in previous quarters.
As compared to 38 percent participants who had reported plans for capacity addition in next 6 months, in Q2 only 28 percent respondents reported so. Over 70 percent said that they have no plans to hire new
workforce in the next three months. Further, the survey said growth of manufacturing exports was expected to be low in Q2 as against previous quarters.
It said seven out of fourteen sectors were likely to witness low (less than 5 percent) growth and five sectors to witness strong growth (greater than 10 percent) in Q2. The sectors which are likely to witness low growth are chemicals, textiles, paper, capital goods and electronics. Sectors such as leather and tyre are likely to witness strong growth.