Bleak export outlok, poor demand, high borrowing cost will lead manufacturing sector into a slowdown, the survey revealed.
The growth of India's manufacturing sector may decelerate during June quarter due to factors like bleak export outlook, poor demand and the high cost of borrowing, a Ficci survey has said.
The hiring outlook for the sector also looks unpromising as over 80% 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% which is much lower than 41% in Q4 2015-16, the survey noted.
Besides, only 38% respondents have reported higher order books for the April-June quarter which is less than that of the previous quarter (44%).
In terms of investment, for Q1 2016-17, 75% 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% to 15% with average rates being around 11.4% per annum compared to 11.8% 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% of the index, declined by 1.2% in March against a growth of 2.7% in same month a year ago.
The sector has not done well in 2015-16 as it grew at a meager rate of 2% against 2.3% in previous year.
The survey had also indicated a revival in the manufacturing activity during the March quarter.
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