Outlook for Q2 Manufacturing Rises Significantly: FICCI Manufacturing Survey

Higher percentage of respondents reported increased production while the cost of doing business has gone up considerably in specific sectors.

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Industry body, FICCI’s latest survey on Q2 Manufacturing trends reveals that after experiencing subdued Q-1 (April-June 2021-22), outlook seems to have improved significantly in Q-2 (July-September 2021-22). According to the survey, The percentage of respondents reporting higher production in second quarter of 2021-22 (July-September 2021-22) was much above. This is considerably higher than that reported in Q4 2020-21, where 72% respondents recorded increase in their production costs.  the fifty percent mark- around 61%. This was significantly higher than the similar percentage of last year’s Q2 quarter (around 24%).

This assessment is also reflective in order books as 72% of the respondents in July-September 2021-22 expected higher number of orders vis-à-vis April-June 2021-22, it said in a statement.

The survey respondents highlighted that they have experienced rising cost of doing business and production. The cost of production as a percentage of sales for manufacturers in the survey has risen in Q1 FY2022, FICCI said in a statement.

Industry respondents have attributed the hike in productions costs primarily to high fixed costs, higher overhead costs for ensuring safety protocols, drastic reduction in volumes due to lockdown, lower capacity utilization, high freight charges and other logistic costs, increased cost of raw materials, power cost and high interest rates, FICCI said in a statement.

Eleven major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, metal & metal products, paper products, textiles, textiles machinery, toys and miscellaneous were covered in the survey. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over 2.7 lakh crore, FICCI said.

The overall capacity utilization in manufacturing was 72% in Q2 2021-22, which again reflects signs of recovery in manufacturing, it added.

However, future investment outlook remains cautious as 32 percent respondents reported plans for capacity additions for the next six months.