Overall manufacturers less optimistic
Auto, Capital Goods, Metal and Metal Products are expecting higher growth for the current third quarter, compared to Q2, according to a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI).
Chemicals and Pharmaceuticals, Electronics & Electricals, Machine Tools and Textile Machinery are expecting moderate growth in the quarter.
Sectors like Cement and Ceramics, Food Products, Leather & Footwear and Textiles & Technical Textiles are expecting low growth during Q3 2017-18.
Outlook for exports seem to be less optimistic vis-à-vis previous quarters, shows the survey of 12 major sectors — auto, capital goods, cement and ceramics, chemicals and pharmaceuticals, electronics & electricals, food products, leather and footwear, machine tools, metal and metal products, paper products, textiles and textiles machinery.
Responses have been drawn from over 310 manufacturing units from both large and SME segments with a combined annual turnover of over Rs.3 lakh crore.
Appreciation of rupee has made the respondents apprehensive of exports outlook with majority of the respondents (around 57%) reporting that their exports were affected in Q-2 due to rupee appreciation.
The proportion of respondents reporting higher output growth during the Q-3 (October- December 2017-18) has fallen to 47% from 50% in Q-2, noted FICCI quarterly survey.
However, the percentage of respondents reporting low production has also come down to 15% in Q-3 quarter from 18% in Q-2 (July-September 2017-18) quarter.
This less optimistic outlook for manufacturing in third quarter of current fiscal is reported to be due to factors like rupee appreciation impacting exports, issues with regard to Goods and Services Tax (GST) implementation and subdued demand in several sectors.
In terms of order books, about 42% respondents in Q-3 (October-December 2017) are expecting higher number of orders as against 47% of Q2 2017-18 which again is reflecting subdued demand in economy, said the survey.
Overall, the capacity utilization in manufacturing remains low. The average capacity utilization for the manufacturing sector is about 75% for Q-2 2017-18 as reported in the survey which is similar to that of Q-1 2017-18.
As was the case in Q-1 2017-18, the future investment outlook remains pessimistic as 73% respondents in Q-2 2017-18 reported that they are not planning any capacity additions at least for the next six months.
Increasing imports, excess capacities, lower domestic demand from industrial sectors, high raw material cost, high interest rates are some of the major constraints which are affecting expansion plans of the respondents.
Some respondents also reported that they are waiting for the market to settle down after the GST.
Overall, in some sectors (like chemicals, food products, textiles, textiles machinery, leather & footwear, metal & metal products, cement and machine tools) average capacity utilization has either remained same or declined in Q-2 of 2017-18.
On the other hand, sectors including auto, paper and electronics & electricals have registered a rise in the average capacity utilisation over the same period, according to the survey. fii-news.com
