Positive Sentiments and Growth Continues for Manufacturing in Q-1 2024-25: FICCI Manufacturing Survey

Jul 26, 2024

 

• Manufacturers Experiencing Improved Demand Conditions

 

NEW DELHI, 26 July 2024: FICCI’s latest QSM (Quarterly Survey on Manufacturing) indicates a step up in growth and sentiments for India’s manufacturing sector in Q-1 2024-25 as compared to the same quarter previous year. Compared to the previous year when 57% of respondents had reported higher production levels, in the current Q1 FY 2024-25, around 78% respondents expect either higher or the same level of production. Domestic demand conditions show optimism in Q1 2024-25. This assessment of Indian manufacturing is also reflected in the order books. 67% of the respondents in the current Q1 2024-25 are expecting a higher number of orders compared to the previous quarter.

 

FICCI’s latest Quarterly Survey on Manufacturing (QSM), which is the 62^nd edition of the survey, assessed the sentiments of manufacturers for Q1 Apr-June 2024-25 for eight major sectors namely, Automotive & Auto Components, Capital Goods & Machine Tools, Cement, Chemicals, Fertilizers & Pharmaceuticals, Electronics & Electricals, Metal & Metal Products, Textiles, Apparels & Technical Textiles and Miscellaneous. Responses have been drawn from manufacturing units from both large and SME segments with a combined annual turnover of over Rs. 3 lakh crores.

 

Figure: % of Respondents expecting Higher Production in the quarter vis-à-vis respective last year’s quarter

 

Source: FICCI survey

 

Capacity Addition & Utilization

The existing average capacity utilization in manufacturing is close to 75%, which reflects sustained economic activity in the sector, which is slightly more as reported in previous surveys.

 

The future investment outlook is also positive, with 41% of respondents indicating plans for investments and expansions in the next six months. Others who have not shared any concrete plans for investments sighted specific problems faced in expanding capacities which included constrained working capital due to high interest rates and delays in customer payments, and difficulty in acquiring skilled labor, other market challenges such as cheaper imports, and dumping of subsidized products from a few countries. Additionally, issues like logistical problems further restricted expansion efforts. The table below, gives average capacity utilization for various sub-sectors of manufacturing:

 

Table: Current Average Capacity Utilization levels as reported in survey (%)

Sector	Average capacity utilization
Automotive & Auto Components	84.0
Capital Goods & Machine Tools	75.2
Cement	82.5
Chemicals, Fertilizers & Pharmaceuticals	71.1
Electronics & Electricals	68.3
Metal & Metal Products	75.4
Miscellaneous	71.4
Textiles, Apparels & Technical Textiles	75.7
Grand Total	74.7

 

Inventories

86% of the respondents had either more or the same level of inventory in Q4 2023-24, which is more than that in same quarter last year. In Q1 2024-25, about 83% of the respondents are expecting higher or the same level of inventory.

 

Exports

In exports, about 56% respondents reported higher exports in Q4 FY 2024 and in Q1 2024-25, around 70% of the respondents expect their exports to be higher as compared to previous year’s similar quarters.

 

Hiring

The hiring outlook remains positive as close to 50% of the respondents are looking at hiring additional workforce in the next three months.

 

Interest Rate and Liquidity

• Average interest rates paid by the manufacturers has been reported to be 9.8%.

 

• Over 80% of respondents reported sufficient availability of funds from banks for working capital or long-term capital.

 

Sectoral Growth

Based on expectations, the likely sectoral growth range is shown below:

 

Table: Growth expectations for Q-1 FY 2024-25*

 

Sector	Growth Expectation
Automotive & Auto Components	Strong to Moderate
Capital Goods & Machine Tools	Moderate
Cement	Moderate
Chemicals, Fertilizers & Pharmaceuticals	Moderate to Low
Electronics & Electricals	Strong to Moderate
Metal & Metal Products	Strong to Moderate
Miscellaneous	Strong
Textiles, Apparels & Technical Textiles	Moderate to Low

* Very Strong >20%; Strong 10-20%; Moderate 5-10%; Low < 5%; Source: FICCI Survey

 

Production Cost

Production cost for manufacturers in Q4 FY 2024 seems to remain on the higher side. The cost of production as a percentage of sales for manufacturers in the survey has risen for close to 60% of respondents, which is slightly less than what was reported in the survey for the previous quarter. The higher production costs can be attributed to several factors, including higher prices for raw materials such as iron, steel, rubber, carbon, and chemicals (e.g., Caustic Soda, Carbon Di-Sulphide). Additionally, rising wages, increased utility and energy costs, higher scrap prices and greater logistics expenses have all been contributing to the overall rise in production costs.

 

Workforce Availability

Most sectors though are not facing shortage of labor at factories as 83% respondents mentioned that they do not have any issues with workforce availability, the remaining 17% feel that there is still lack of skilled workforce available in their sector and there is a need to step up efforts both at government and Industry level.