'Mfg growth to remain subdued in Q3 on high interest rates'
New Delhi: The country's manufacturing sector is expected to witness subdued growth in the October-December quarter on concerns over high interest rates, a survey by industry body Ficci today said.
"Low or subdued growth is supported primarily by some improvement on export front. However, we are seeing rising concerns over the cost of credit by the manufacturers as compared to previous surveys," Ficci President Naina Lal Kidwai said.
Upturn in industrial sector is particularly evident in sectors like leather, textiles, cement, chemicals and textiles machinery. At the same time, sectors like automotive, capital goods and electronics are expected to witness sluggish growth in Q3, the survey found.
Besides, outlook on hiring looks bleak in manufacturing, with over 75 percent of the respondents unlikely to hire additional workforce in next three months.
Moreover, the survey found that five out of thirteen sectors were likely to witness low growth (less than 5 percent). Only two sectors, leather and paper, are expected to have a strong growth of over 10 percent in Q3 2013-14 while remaining sectors are likely to witness moderate growth.
"Notably, the proportion of respondents availing credit above 12 percent per annum rose significantly in the current survey to 58 percent as compared to 42 percent in previous survey", Kidwai said.
Interest rate paid by the manufacturers, as reported in the survey, ranges from 8 to 16 percent with average interest rate at around 12 percent per annum.
The investment scenario in manufacturing sector will also remains subdued in Q3 with 72 percent respondents not having any plans for capacity additions for the next six months as compared to 74 percent respondents in the previous survey.
However, the demand conditions appear to be slightly better with 44 percent respondents reporting higher order books for Q3 2013-14 as compared to 32 percent respondents in the previous quarter.
The survey covers thirteen major sectors namely textiles, capital goods, textiles machinery, metals, chemicals, cement, electronics, automotive, leather & footwear, machine tools, food processing, paper and tyre.