Indian Manufacturing Sector Continues Growth Journey: FICCI Manufacturing Survey

Feb 10, 2025

• Manufacturing Investment Outlook Stable for Next Six Months
• Index is Second Highest for Q-3 FY 2025 in the Last Few Years

 

NEW DELHI, 10 February 2025: FICCI's latest Quarterly Survey on Manufacturing (QSM) indicates sustained growth and higher optimism for India's manufacturing sector for Q-3 2025. In comparison to Q3 FY 2024, when 73% of respondents reported higher production levels, approximately 83% of respondents reported either higher or same production levels in Q3 FY 2025. This was the second highest index in the last few months, indicating continued growth path for the sector in months to come, noted the survey. In addition, the investment outlook for manufacturing also looks stable with 42% of respondents indicating plans for investments and expansions in the next six months, which is same as in the last survey.

 

Domestic demand conditions show optimism in Q3 2024-25, however going forward demand could be an issue. This assessment of Indian manufacturing is also reflected in the higher order books. 83% of the respondents are expecting a higher number of orders in Q3 FY 25 compared to the previous quarter.

 

FICCI’s latest Quarterly Survey on Manufacturing (QSM), which is the 64th edition of the survey, assessed the performance of manufacturers for Q3 Oct-Dec 2024-25 for eight major sectors namely, Automotive & Auto Components, Capital Goods, Chemicals, Fertilizers & Pharmaceuticals, Electronics & Electricals, Machine Tools, 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. 4.7 lakh crores.

 

Source: FICCI survey

 

Capacity Addition & Utilization

The existing average capacity utilization in manufacturing is around 75%, which reflects sustained economic activity in the sector. This is more or less the same as last time. The future investment outlook is also positive, with 42% of respondents indicating plans for investments and expansions in the next six months.

Challenges faced by respondents in expanding capacities include rising raw material costs, high interest rates, which are creating financial pressures. Respondents expect weak domestic and export demand, further contributing to market uncertainties going forward. This hopefully will be addressed through slew of measures announced in the recent budget.  The availability of skilled labor remains a significant concern, alongside regulatory complexities such as lengthy approval processes and non-tariff barriers. Additionally, limited access to advanced machinery, high land prices, and competitive pressures from countries benefiting from trade advantages are impacting pricing and profitability, making expansion efforts difficult. 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	75
Chemicals, Fertilizers & Pharmaceuticals	72
Electronics & Electricals	73
Machine Tools	73
Metal & Metal Products	73
Miscellaneous	72.1
Textiles, Apparels & Technical Textiles	74
Grand Total	75 (apprx)

 

Inventories

In Q3 2024-25, more than 75% of the respondents are expecting higher or same level of inventory.

 

Exports

In exports, about 65% respondents reported higher exports in Q2 FY 2024-25 and in Q3 2024-25, more than 70% of the respondents expect their exports to be higher as compared to previous year’s similar quarters.

 

Hiring

35% of the respondents are looking at hiring an additional workforce in the next three months.

 

Interest Rate

The average interest rate paid by the manufacturers has been reported to be 9.5%. A little 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	Moderate
Chemicals, Fertilizers & Pharmaceuticals	Moderate
Electronics & Electricals	Moderate
Machine Tools	Low
Metal & Metal Products	Moderate to Low
Miscellaneous	Moderate
Textiles, Apparels & Technical Textiles	Moderate

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

 

Production Cost

Production costs for manufacturers in Q3 FY 2025 seem to remain on higher side. Nearly 60% of respondents reported an increase in the cost of production as a percentage of sales, which is consistent with the previous quarter’s findings, indicating that costs are still on the higher side. The increase in production costs compared to last year is primarily driven by rising raw material prices, particularly for materials like iron/steel, rubber, carbon, and chemicals such as ethylene oxide and caustic soda. Additional contributing factors include higher labor costs, increased wages, and a rise in freight and transportation charges. The depreciation of the rupee has also led to higher import costs.

 

Workforce Availability

Most sectors though are not facing shortage of labor at factories as a little less than 80% respondents mentioned that they do not have any issues with workforce availability, the remaining 20% 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.