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Mfg sector hit by economic uncertainty and high raw material price: Survey

New Delhi, May 12 (KNN) It is just not domestic factors but also and more importantly the export outlook which seems to be weakening as a result of which manufacturing growth is likely to be pulled down in the first quarter of the current fiscal, according to an industry survey.

According to FICCI’s latest quarterly survey on manufacturing which projected a weak outlook for the sector in April-June 2014-15 (Q-1), “The outlook on the basis of FICCI Manufacturing Survey for Q-1 2014-15 is less optimistic than in Q-4 2013-14 for the manufacturing sector. The survey indicates moderation in the manufacturing activity in Q-1 of 2014-15 as compared to Q-4 of 2013-14.


The weakened prospects for the sector are also reflected in the order books of the manufacturers, noted the survey.

 

“Units in textiles sector are significantly affected by high prices of raw materials/ intermediates, deficiency of power, lack of skilled manpower, low export demand and uncertainty of economic environment. Other issues faced by textile sector are shortage of finance, labour related issues, low domestic demand and competition from imports,” the survey said.


In the machine tool industry, most of the respondents reported lower levels of production in January - March 2014 quarter as compared to previous year. But, in the current quarter from April - June 2014, respondents are expecting an increase in production levels by 2-5 per cent as compared to the same quarter of previous year.

This has also been reflected in the order books of the respondents with most of them expecting their order books to improve for the quarter April - June 2014 compared to January - March 2014, the survey said.

Firms in leather and footwear sector are significantly constrained by high prices of raw materials and deficiency of raw materials, shortage of working capital finance, labour related issues, uncertainty of economic environment and availability of skilled manpower.
 
Another factor acting as impediment for leather sector is inadequate power.

Order books of all the food processing firms are likely to remain same or show an improvement in April- June compared to January- March 2014 quarter.

In the food processing sector, the capacity utilization stands at 78 per cent and is higher than last year for half of the firms. Also, 50 per cent firms are planning to increase their capacity in next six months.

In the Chemicals and Fertilizers sector, high prices of raw materials and uncertain economic environment are significantly affecting growth of the sector, the survey said.

Moreover, deficiency of raw materials, deficiency of power, labour issues, shortage of working capital, lower domestic and export demand, competition from imports and availability of skilled manpower are amongst the other constraints affecting the growth in this sector.

Capacity utilization stands at 80 per cent for this sector. Currently, the capacity utilization is higher than last year for 42 per cent of the respondents. Majority of the manufacturers are not planning to add capacity in next 6 months. Chemicals and fertilizer producers are facing delay in getting environment clearances in capacity addition.


Capital Goods sector is not very hopeful of recovery in manufacturing growth rate in near future as only 20 per cent respondents expect a revival in the sector. 72 per cent respondents expect that the growth would remain at the same level in the coming months.

The survey measures the expectations of manufacturers for Q-1 (April-June 2014-15) for fourteen major sectors - textiles, capital goods, metals, chemicals, cement, electronics, automotive, leather and footwear, machine tools, Food processing, Paper, tyre, textiles, machinery, ceramics and others. Responses have been drawn from 352 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 3.75 lac crore.