FICCI foresees bleak future for manufacturing sector [Jan 2012]

January 11, 2012 10:42 am

Moderation in consumer demand, rise in raw material prices and weakening of the export market are worsening growth in manufacturing sector which is expected to further slow down during the third quarter of the current fiscal.
According to FICCI’s Survey, which drew responses from 384 manufacturing units, an overwhelming 87 per cent of total respondents said that they expect growth to moderate in their sector in Q-3 of 2011-12 as compared to Q-3 of the prior year. In the previous survey, over 74 per cent respondents expected growth to moderate, but in the latest survey 87 per cent respondents expect growth to moderate in Q-3.
In the last survey, manufacturers did not expect exports to moderate significantly; by contrast, in the latest survey pessimism has risen on the exports outlook as well. The survey gauges the expectations of manufacturers for Q-3 for major sectors such as textiles, capital goods, metals, chemicals, tyres, cement, consumer electronics, batteries, automotive, textiles machinery, leather & footwear, food processing etc.
The survey noted worsening demand conditions for the manufacturing sector in Q-3 as compared with previous quarters; a significant fall in order books is evident. Hiring sentiments too, were bleak with around 66 per cent of respondents reported that they are not planning to increase their workforce in the next 3 months as compared with 57 per cent in the previous survey. A significant downfall in the capacity addition has also been reported in the few sectors as the new investments falls drastically.
Based on expectations in different sectors, the Survey pointed out that nine out of thirteen sectors were likely to witness low (less than 5 per cent) to moderate (between 5 to 10 per cent) growth in Q-3. However, sectors such as automotive, auto-components, leather and food processing and miscellaneous are likely to witness strong growth of more than 10 per cent in third quarter.