New Delhi: Growth of India's manufacturing sector may decelerate during June quarter due to factors like bleak export outlook, poor demand and high cost of borrowing, a FICCI survey has said.
The hiring outlook for the sector also looks unpromising as over 80 percent survey respondents said they are unlikely to hire in the said quarter, the industry body's survey said.
The outlook for export continues its downward trajectory in the first quarter of 2016-17 with the proportion of respondents, expecting higher exports in the quarter, falling.
The proportion of respondents expecting higher exports in Q1 2016-17 is 36 percent which is much lower than 41 percent in Q4 2015-16, the survey noted.
Besides, only 38 percent respondents have reported higher order books for the April-June quarter which is less than that of previous quarter (44 percent).
In terms of investment, for Q1 2016-17, 75 percent respondents as against 68 in previous quarter reported that they don't have any plans for capacity additions for the next six months implying slack in the private sector investments in manufacturing to continue.
It added that "interest rate paid by the manufacturers seems to have moderated in the last few months, however it still remains high. The interest rate ranges from 6 percent to 15 percent with average rates being around 11.4 percent per annum compared to 11.8 percent in the previous survey."
Capacity utilisation has improved in cement, food, capital goods and electronics sector. On the other hand, in chemicals, textiles machinery and tyres it (capacity utilisation) has remained same.
The quarterly survey gauges expectations of manufacturers for April-June for thirteen major sectors namely textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather and footwear, machine tools, food, tyre, paper and textiles machinery.
Responses have been drawn from 308 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 4 lakh crore.
According to a data released by Central Statistics Office, manufacturing sector, which accounts for over 75 percent of the index, declined by 1.2 percent in March against a growth of 2.7 percent in same month a year ago.
The sector has not done well in 2015-16 as it grew at meager rate of 2 percent against 2.3 percent in previous year.
The survey had also indicated revival in the manufacturing activity during the March quarter.