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Positive sentiments in manufacturing in Jan-Mar: FICCI , May 19, 2019

The latest Quarterly Survey on Manufacturing by the Federation of Indian Chamber of Commerce and Industry (FICCI) highlights a continued positive sentiment for manufacturing sector in the fourth quarter (Q4) of 2018-19. For the first time in many quarters, the overall capacity utilization in manufacturing has witnessed a rise to 80 per cent in that quarter.

It was hovering at 75 per cent for last many quarters.

The overall sentiment in the manufacturing sector remains positive as the proportion of respondents reporting higher output growth (around 54 per cent) during the January-March 2018-19 has remained same as compared to the third quarter of 2018-19, according to the survey.

On hiring front, the outlook for the sector seems to have slightly improved for near future. While in Q4 of 2017-18, 70 per cent respondents mentioned that they were not likely to hire additional workforce, this percentage has come down to 62.5 per cent for Q4 of 2018-19.

Going forward it is expected that hiring scenario will improve further, with 37.5 per cent of the respondents in Q-4 of 2018-19 looking at hiring more people now compared to 30 per cent in Q4 of 2017-18, noted the survey.

The survey covered 300 manufacturing units in 12 major sectors—automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, leather and footwear, metal & metal products, paper products, textiles, textile machinery, tyre and miscellaneous.

In terms of order books, 44 per cent of the respondents in January-March 2019 are expecting higher number of orders against 43 per cent in October-December 2018-19.

Forty per cent of the respondents reported plans to add capacity in the next six months compared to 47 per cent in Q3 of 2018-19.

High raw material prices, high cost of finance, uncertainty of demand, shortage of skilled labour, high imports, requirement of technology upgradation, low domestic and global demand, excess capacities, delay in disbursements of state and central subsidies and competing countries such as Bangladesh and Vietnam enjoying lower wage cost and export benefits resulting in erosion of competitiveness of Indian exporters are some of the major constraints which are affecting expansion plans of the respondents, the survey concluded.

The outlook for exports is somewhat positive as 42 per cent of the participants are expecting a rise in exports for Q4 2018-19 and 33 per cent are expecting exports to continue to be on the same path as that of same quarter last year.