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FICCI Manufacturing Survey Points Towards Recovery of the Sector in Q-2

25 November 2020: FICCI’s latest quarterly survey on Manufacturing points towards recovery of manufacturing sector for Q-2 (July-September 2020-21) as compared to previous quarter. The percentage of respondents reporting higher production in second quarter of 2020-21 has increased vis-?-vis the Q-1 of 2020-21. The proportion of respondents reporting higher output during July-September 2020 rose to 24%, as compared to 10% in Q-1 of 2020-21. The percentage of respondents expecting low or same production is 74% in Q-2 2020-21 which was 90% in Q-1 of 2020-21. The survey covered wide areas of relevance for manufacturing like exports, capacity utilization, ongoing restrictions, availability of labour/workforce and others. In many of these areas there are signs of operations inching towards normal and in coming months could see better performance.

FICCI’s latest quarterly survey assessed the sentiments of manufacturers for Q-2 (July-September 2020-21) for twelve major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, leather and footwear, medical devices, metal & metal products, paper products, textiles, textile machinery, and miscellaneous. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of around Rs.3 lakh crore.

Overall capacity utilization in manufacturing has witnessed a rise to 65% as compared to 61.5% in Q4 2019-20. The future investment outlook, however, is subdued as only 18% respondents reported plans for capacity additions for the next six months as compared to 22% in previous quarter.

High raw material prices, high cost of finance, shortage of skilled labor and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown across all countries to contain spread of coronavirus, excess capacities due to high volume of cheap imports into India, lack of financial assistance, uncertain demand scenario across globe, complex procedures for obtaining environmental clearances, high power tariff, are some of the major constraints which are affecting expansion plans of the respondents.

From the table below, it is evident that the average capacity utilization for Q1 2020-21 has increased in sectors such as Automotive, Capital Goods, Metals & Metal Products, Electronics, Paper Products and Textiles.

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