Rising raw material cost dampening manufacturing growth: Ficci

December 11th, 2011 - 1:20 pm ICT by IANS  

New Delhi, Dec 11 (IANS) Fewer orders, moderate exports and rising raw material costs have dampened the manufacturing sector, the Federation of Indian Chambers of Commerce and Industry (Ficci) says in its latest quarterly survey.

According to Ficci’s survey, 87 percent of the 384 manufacturing units said they expect growth to moderate in the third quarter of 2011-12 as compared to the like period of 2010-11.

“The survey noted worsening demand conditions for the manufacturing sector in Q3 as compared with previous quarters; a significant fall in order books is evident,” the industrial lobby said.

The survey also noted a fall in capacity utilisation in the third quarter as only 36 percent of the respondents said their capacity utilisation levels were higher than in the corresponding period of the last fiscal.

With a fall in existing capacity utilisation, the survey said capacity addition via new investments will fall from the levels of the previous quarter.

“In the previous quarter, 41 percent of respondents reported plans for capacity addition. In the latest survey, only 32 percent have done so.”

The survey further revealed that the sector was not keen on increasing its workforce in the next three months, as compared to a 57 percent increase in the previous survey.

“The food processing and leather sectors are the exception because employment prospects have improved,” it said.

Exports too have been hit due to global economic uncertainties, which has further damped the manufacturing sector growth.

“Ficci’s survey also showed that growth of manufacturing exports was expected to moderate in the third quarter as only 29 percent respondents expect their exports to rise in third quarter compared to about 40 percent in the earlier survey,” it said.

The latest data on the index of industrial production (IIP) — a barometer of factory output — showed industry production for September at 1.9 percent, the slowest in over two years due to rising interest rates and a slump in investments.

The review pointed at the slow growth in manufacturing, construction and mining sector for slackening pace of economic expansion.

Data for the second quarter showed manufacturing growing at a sluggish 2.7 percent, agriculture ouptut rising by 3.2 percent and the construction sector managing an expansion of 4.3 percent. Mining and quarrying, however, saw a decline.

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