There are signs cost pressures in manufacturing sector softening: FICCI survey
Mar 13, 2023
New Delhi [India], March 13 : With growth expected to continue for the Indian manufacturing sector in Jan-March 2022-23, there are signs that cost pressure witnessed in the last many months seems to be softening a bit for the sector, notes latest FICCI Manufacturing Survey.
FICCI's latest quarterly survey on manufacturing reveals that after experiencing a revival of the Indian economy in the financial year 2021-22, the momentum of growth has continued for the subsequent quarters of 2022-23 with some temporary effect of the global slowdown on Indian manufacturing.
High raw material prices especially that of steel, increased transportation, logistics, and freight cost, and a rise in the prices of crude oil and fuel had been the main contributors to the increasing cost of production.
Other factors responsible for escalating production costs include enhanced labor costs, high cost of carrying inventory, and fluctuation in the foreign exchange rate.
FICCI's latest quarterly survey assessed the sentiments of manufacturers for Jan-March 2022-23 for eleven major sectors namely Automotive and Auto Components, Capital Goods, Cement, Chemicals and Pharmaceuticals, Electronics, Machine Tools, Metal and Metal Products, Paper Products, Petrochemicals and Fertilizers, Textiles, Apparels and Technical Textiles, Textile Machinery and Miscellaneous.
Responses have been drawn from over 400 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 10 lakh crore.
The existing average capacity utilization in manufacturing is around 75 per cent, which reflects sustained economic activity in the sector. In fact, this is more than 70 per cent capacity utilization reported for the previous surveys.
Based on expectations, the Auto, Capital Goods, Cement, Electronics and Petrochemicals, and Fertilizers sectors are poised to see strong growth. Rest all the sectors are expected to register moderate to low growth in Q-4 2022-23 as given in the table below.
Further, the survey showed hiring outlook is positive but remains below potential as only 32 per cent of the respondents were looking at hiring an additional workforce in the next three months.
