Indian manufacturing outlook rises in Q2 FY22, business cost up: FICCI

The percentage of respondents reporting higher production in Q2 was around 61 per cent—much above the 50 per cent mark. This was significantly higher than the similar percentage of last year's Q2 (around 24 per cent).

The cost of production as a percentage of sales for manufacturers in the survey has risen for 80  per  cent respondents in Q1 of this fiscal. This is considerably higher than that reported in Q4 2020-21, where 72 per cent respondents recorded increase in their production costs.

Industry respondents have attributed the hike in productions costs primarily to high fixed costs, higher overhead costs for ensuring safety protocols, drastic reduction in volumes due to lockdown, lower capacity utilization, high freight charges and other logistic costs, increased cost of raw materials, power cost and high interest rates, FICCI said in a press release.

The overall capacity utilisation in manufacturing was 72 per cent in Q2, which again reflects signs of recovery in manufacturing. The future investment outlook however remains that of cautious optimism, as 32 per cent respondents reported plans for capacity additions for the next six months.

High raw material prices, high cost of finance, uncertainty of demand, shortage of skilled labour 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, unstable market and high power tariff are some of the major constraints affecting expansion plans of the respondents, FICCI said.

The outlook for exports seems improving as around 58 per cent of the participants are expecting a rise in their exports for Q2 and 30 per cent are expecting exports to continue to be on same path as that of same quarter last year.

Fibre2Fashion News Desk (DS)