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Manufacturing sector to see growth in April-June 2009

12 Mar '09

4 min read

While the Indian manufacturing sector could see a negative growth for the Quarter January-March 2009, but the sector is quite likely to witness a positive growth for the Quarter April-June 2009, according to FICCI's Manufacturing Survey. In the first Quarter of 2009 i.e. January-March, nine out of twelve sectors covered in the survey are likely to see a fall in their production as compared to the same Quarter in last year.

Only a few manufacturing sectors could see a positive growth in Jan-March 2009 which would not be adequate to push up the growth of the whole manufacturing sector, pointed-out FICCI Survey. However, in second Quarter of 2009 i.e. April-June, prospects look better for Indian manufacturing sector, said FICCI. These six sectors are textiles, machinery, and miscellaneous industry. Important sectors like auto-parts, chemicals may continue to witness fall even in the April-June 2009 Quarter.

The survey was done in the month of February 2009, to assess the impact of first two Stimulus Packages and the announcements made by RBI about rate cuts on the Indian manufacturing sector, said FICCI. Majority of the respondents felt that the impact of Stimulus Packages on the manufacturing sector was not significant enough as on date and real impact would be seen from the Quarter April-June 2009 onwards when the manufacturing sector is likely to witness positive growth as compared to last year, observed FICCI survey.

Only in a few sectors like machinery some revival of demand and as a result growth could be seen as of now, pointed-out FICCI Survey. However, no significant impact of the first two packages is seen on sectors like textiles, leather etc. Monetary policy easing and policy rate cuts announced by RBI also had limited impact so far for the manufacturing sector as most respondents said that although cost of borrowing has reduced but credit availability remains an issue of great concern, Survey pointed-out.

FICCI Survey also noted that current operating capacity remains low in a number of manufacturing sectors like leather, textiles, machinery. Export scenario for the manufacturing sector remains bleak for both the quarters i.e. January-March 2009 and April-June 2009. A large number of sectors like textiles, leather, chemicals are likely to see a fall in their exports in January-March 2009 and April-June 2009, according to FICCI Survey. Only a few sectors like FMCG, Cement and Machinery expect to see some growth in their exports in the Quarter April-June 2009, observed FICCI.

The Survey also noted that a number of manufacturing sectors like textiles, leather & footwear, chemicals are facing strong competition from Chinese manufacturers. Chinese prices of manufactured goods are generally much less than Indian products. In sectors like auto-component Chinese prices are 10 to 40% lower than similar Indian products. In case of tyres, prices of Chinese products are 20 to 25% lower than Indian tyres.

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