Improvement seen in Export Outlook in FICCI Q1 Survey

Aug 10, 2018

•   High growth expected in Automotive, Capital Goods, Metal and Metal Products and Electronics & Electricals- FICCI Survey
•       Capacity utilisation continues to be around 77% 

New Delhi, 10 August 2018: FICCI's Quarterly survey on Manufacturing re-iterates a positive outlook for exports with 44% of the participants expecting a rise in exports for Q-1 2018-19.

The sentiments for the manufacturing sector in Q-1 (April-June 2018-19) remains positive, though the proportion of respondents reporting higher output growth during the April - June 2018 quarter has decreased to 49% from 55% in January-March 2018, maintaining the general trend witnessed in the previous years.

However, going ahead, high growth is expected in Automotive, Capital Goods, Metals and Metal Products and Electronics & Electricals. Moderate growth is expected in Textiles, FMCG, Cement and Ceramics, Chemicals & Pharmaceuticals, Leather & Footwear and Textiles Machinery in Q-1 2018-19 whereas low growth is expected in Paper Products.

The average capacity utilization for the manufacturing sector at about 77% in Q-1 2018-19 is same as that of previous quarter. In sectors like capital goods, textiles, textiles machinery and chemicals & pharmaceuticals, average capacity utilization has either increased or remained almost same in Q-4 of 2017-18 & Q-1 2018-19, while in automotive, cement and ceramics, electronics & electricals, leather and footwear, metal and metal products, the capacity utilisation has fallen in Q-4 2017-18 & Q-1 2018-19 vis-a-vis Q-3 2017-18.

FICCI's Quarterly survey assessed the sentiments of manufacturers for Q-1 (April-June 2018-19) for eleven major sectors namely automotive, capital goods, cement and ceramics, chemicals and pharmaceuticals, electronics & electricals, FMCG, leather and footwear, metal & metal products, paper products, textiles machinery and textiles. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over 3 lakh crore. 

 

Highlights of the Report

Figure: % of Respondents Expecting Higher Production in the Quarter

                                             vis-a-vis Respective Last Year's Quarter

                  

Source: FICCI Survey

Exports

•     The outlook for exports is positive as 44% of the participants are expecting a rise in exports for Q-1 2018-19 and 37% are expecting exports to continue on same path as that of same quarter last year. Rupee appreciation did affect exports during Q-4 2017-18 as 55% of the respondents reported that the exports were affected by up to 5% due to rupee appreciation.

Capacity Addition & Utilization

• The average capacity utilization for the manufacturing sector is about 77% as reported in the survey which is same as that of previous quarter.
• The future investment outlook is also moderate as 65% respondents reported that they are not planning any capacity additions for the next six months. High raw material prices, high cost of finance, excess capacities, uncertainty of demand, availability of land and shortage of working capital are some of the major constraints which are affecting expansion plans of the respondents.
• In sectors like capital goods, textiles, textiles machinery and chemicals & pharmaceuticals, average capacity utilization has either increased or remained almost same in Q-4 of 2017-18 & Q-1 2018-19. In automotive, cement and ceramics, electronics & electricals, leather and footwear, metal and metal products, the capacity utilisation has fallen in Q-4 2017-18 & Q-1 2018-19 vis-���������-vis Q-3 2017-18.

 

Table: Current Average Capacity Utilization Levels As Reported in Survey (%)

*NA: Not available due to lack of data

Inventories

•  69% of the respondents maintained either more or same level of inventory, which is less as compared to 90% in the previous quarter. This has been due to low demand and some impact of GST on sales as reported by some respondents.

Hiring

���������         Hiring outlook for the sector remains subdued in near future as 69% of the respondents mentioned that they are not likely to hire additional workforce in next three months. This proportion has slightly declined as compared to the previous quarter where 70% of the respondents were not in favour of hiring additional workforce.

Interest Rate

•  *Average interest rate paid by the manufacturers has fallen vis-a-vis the last quarter standing at 10.2% p.a.; but the highest rate continues to be as high as 15% (decreased by 1% over previous quarter).

*The feedback is based on the responses received prior to the repo rate hikes.

Sectoral Growth

• Based on expectations in different sectors, it is noted that high growth is expected in Automotive, Capital Goods, Metals and Metal Products and Electronics & Electricals. Moderate growth is expected in Textiles, FMCG, Cement and Ceramics, Chemicals & Pharmaceuticals, Leather & Footwear and Textiles Machinery in Q-1 2018-19 whereas low growth is expected in Paper Products.

Table: Growth expectations for Q-1 2018-19 compared with Q-1 2017-18 

                                                                                          Note: Strong > 10%; 5% < Moderate < 10%; Low < 5%

                                                                                                                  Source: FICCI Survey

Production Cost

• The cost of production as a percentage of sales for manufacturers in the survey has risen for 61% respondents. This is primarily due to increase in cost of raw materials, increased wages, power cost and higher GST rates on certain products.

Study

• FICCI Quarterly Survey on Indian Manufacturing Sector