New Delhi: The sentiment towards manufacturing in India has witnessed a notable improvement in the initial quarter of the fiscal year 2024-25, as per the findings of FICCI's Quarterly Survey on Manufacturing.
The survey indicates that, in comparison to the preceding year, where 57 percent of respondents reported an increase in production levels, approximately 78 percent of respondents in the current quarter expect either an increase or no change in production levels.
Furthermore, the survey underscores a sense of optimism regarding domestic demand conditions for the first quarter of 2024-25, as evidenced by the order books. Around 67 percent of respondents anticipate a higher volume of orders compared to the previous quarter.
The survey evaluated sentiments across eight major sectors: Automotive & Auto Components, Capital Goods & Machine Tools, Cement, Chemicals, Fertilizers & Pharmaceuticals, Electronics & Electricals, Metal & Metal Products, and Textiles, Apparels & Technical Textiles. Responses were collected from manufacturing units across both large and small-scale enterprises, with an aggregate annual turnover exceeding Rs. 3 lakh crore.
FICCI has reported that the current average capacity utilization in manufacturing stands at approximately 75 percent, reflecting sustained economic activity, which is marginally higher than in previous surveys. The outlook for investment is also positive, with 41 percent of respondents indicating plans for investments and expansions over the next six months.
However, some respondents highlighted challenges such as constrained working capital due to elevated interest rates, delays in customer payments, difficulties in securing skilled labor, and market challenges including the availability of cheaper imports and subsidized products from certain nations. Logistical issues also present barriers to expansion efforts.
The survey observed that 86 percent of respondents had either increased or maintained inventory levels in the fourth quarter of 2023-24, and approximately 83 percent expect higher or unchanged inventory levels in the first quarter of 2024-25. In terms of exports, 56 percent of respondents reported an increase in exports during the fourth quarter of FY 2024, with around 70 percent expecting higher exports in the first quarter of 2024-25 compared to the preceding year's similar periods.
The hiring outlook remains positive, with nearly 50 percent of respondents planning to recruit additional staff in the next three months. The average interest rate paid by manufacturers is reported to be 9.8 percent. Over 80 percent of respondents have reported sufficient access to funds from banks for working capital or long-term capital.
According to the survey, the production costs for manufacturers in the fourth quarter of FY 2024 have remained elevated, with nearly 60 percent of respondents reporting an increase in production costs as a percentage of sales, which is slightly lower than in the previous quarter.
The factors contributing to the increase in production costs include escalated prices for raw materials such as iron, steel, rubber, carbon, and chemicals (e.g., Caustic Soda, Carbon Di-Sulphide), rising wages, increased utility and energy costs, higher scrap prices, and elevated logistics expenses.
