FICCI Survey forecasts bleak outlook for manufacturing sector in 2nd quarter

Growth of manufacturing sector to remain low in quarter two of 2012-13 (July-September 2012), projects FICCI’s latest Quarterly Survey. The survey noted that rupee depreciation has presumably affected the sector’s competitiveness severely over the last few months.
According to the survey, which drew responses from 418 manufacturing units and associations, around 44 per cent respondents felt that they expect growth to be higher in Q2 vis-a-vis last year as against 46 per cent respondents saying so for previous quarter (Q1). Only 36 per cent, 13 per cent and 26 per cent respondents in quarter four, three and two of 2011-12 respectively expected growth to be higher in manufacturing, as per previous surveys.
The survey noted that over 67 per cent respondents were affected by rupee depreciation in the last few months. Rupee depreciation has led to increased cost of their imported raw materials and inputs by 5-25 per cent in last few months. Sectors which have been affected more by this depreciation are automotive, electronics, capital goods, chemicals and textiles. As against this, only 42 per cent respondents said that the depreciation has helped in improving their exports.
The survey noted that demand conditions remained subdued in the economy for the manufacturing sector in Q2 as compared to previous quarters as only 31 per cent respondents said that they have higher order books for July-September quarter. In the previous quarter survey, 38 per cent of the respondents had reported plans for capacity addition in the next six months. However, in the latest survey, only 28 per cent planned to add capacity.
Importantly, according to the survey, over 70 per cent respondents did not report any plans for hiring new workforce in next three months. Only 30 per cent respondents reported that they are planning to increase their workforce in next 3 months.

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