Outlook for manufacturing improves for Q4 FY18: FICCI

The proportion of respondents reporting higher output growth during the Q4 2017-18 has increased significantly to 55 per cent from 47 per cent in Q3, FICCI survey said. The percentage of respondents reporting low production has also come down to 11 per cent in fourth quarter from 15 per cent in Q3 of 2017-18.

FICCI’s latest quarterly survey assessed the expectations of manufacturers for Q4 (January-March 2017-18) for twelve major sectors, including the textiles and textiles machinery sectors. Responses were drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 3 lakh crore.

In terms of order books, 51 per cent of the respondents in Q4 are expecting higher number of orders as against 42 per cent of Q3 2017-18 which again is a sign of revival, observed FICCI Survey.

However, the outlook is not as rosy in terms of capacity addition and utilisation, and the future investment outlook remains pessimistic as 64 per cent respondents in Q3 2017-18 reported that they are not planning any capacity additions for the next six months. “High raw material prices, low domestic and export demand, exchange rate appreciation, increasing imports, excess capacities and shortage of working capital finance are some of the major constraints which are affecting expansion plans of the respondents,” the survey said.

Overall capacity utilisation in manufacturing remains low. The average capacity utilisation for the manufacturing sector is about 77 per cent for Q3 2017-18 as reported in the survey which is similar to that of Q2 2017-18. In some sectors like textiles and textiles machinery, and leather & footwear, average capacity utilisation has either increased or remained almost same in Q3 of 2017-18.

In terms of exports, the outlook seems marginally positive as 47 per cent of the participants are expecting a rise in the exports for Q4 and 34 per cent are expecting the exports to continue on same path as that of same quarter last year. “Rupee appreciation has also affected exports during Q3 2017-18 as 80 per cent of the respondents reported that the exports were affected by upto 5 per cent due to rupee appreciation.”

Based on expectations in different sectors, it is noted that low growth of less than 5 per cent is expected in textile machinery and textiles sector in Q4.

Meanwhile, the cost of production as a percentage of sales for manufacturers in the survey has risen significantly for 62 per cent respondents in Q3 2017-18. This is primarily due to increase in cost of raw materials, increased wages, power cost and higher GST rates on certain products. (RKS)

Fibre2Fashion News Desk – India