FICCI survey points at a plethora of uncertainties post lockdown, that needs to be sorted out
By Venkatesh Raghavan*
Mumbai: The average capacity utilization for Q4 2019-20 has decreased for all the sectors except Medical Devices and Metals and Metal Products where average capacity utilization has remained same in Q-4 of 2019-20 as compared to Q-3 2019-20, the latest survey of The Federation of Indian Chambers of Commerce and Industry (FICCI) on the first quarter of 2020-21, has shown.
On the capacity utilization front, the survey shows, there are a plethora of uncertainties to be sorted out. The overall capacity utilization in manufacturing has witnessed a decline to 61.5% in Q4 2019-20 as compared to 76% in Q-3 2019-20. The future investment outlook looks subdued as only 22% respondents reported plans for capacity additions for the next six months as compared to 28% in the previous quarter. High raw material prices, high cost of finance, uncertainty of demand, shortage of skilled labor and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown across all countries to contain spread of coronavirus, excess capacities due to high volume of cheap imports into India, lack of financial assistance, unstable market, complex procedures for obtaining environmental clearances, high power tariff, are some of the major constraints which are affecting expansion plans of the respondents.
The Q-1 has spelt that the manufacturing sector is facing a very dismal patch as compared to the previous few quarters initiating from 2019. Q-1 covers the period from April-June 2020-21. The survey disclosed that respondents to their survey on Q-1 indicate much lower percentage when it comes to the higher production category. Compared to the previous quarter, Q4 of 2019-20, there is a 10% dip in the figures. Around 90% of the respondents are reporting low or same levels of production for this quarter.
Other features that the survey dwelt on indicated that in areas like automotive, textile machinery and leather or footwear, the firms are on the lookout for alternative sources of inputs or raw materials. The survey also reported sharp fall in capacity and workforce numbers in most firms. On an average, the firms are operating based on the sector they belong to from 28 to 63%. The workforce deployed by the firms ranged from 33 to 57%.
The figures emanating from order books were also glum. Nearly 85% of the survey respondents for Q-1 had expected less number of orders as against 54% in January-March 2019.
FICCI’s latest quarterly survey assessed the sentiments of manufacturers for Q-1 (April-June 2020-21) for twelve major sectors, namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics & electricals, leather and footwear, medical devices, metal and metal products, paper products, textiles, textile machinery, and miscellaneous. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over 2.5 lakh crore.