The latest FICCI manufacturing survey indicates a positive trend in capacity utilisation across sectors, with levels hovering around 75 percent on an average. Even a few sectors which lagged in previous quarters have risen significantly to mid-60 percent range.

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This suggests a steady recovery and increased economic activity in multiple industries, said FICCI President Subhrakant Panda, hoping that this growth sentiment continues in the future.

In a discussion with CNBC-TV18’s Shereen Bhan on Monday, Panda noted that the export sectors was seeing some softness and hoped that there will be a turnaround in global sentiment.

He believes that the growth sentiment will continue because of what the government has done in terms of a supportive environment with ease of doing business besides ensuring significant outlay in terms of public capital expenditure, which is aiding growth in private investment too, he said.

Exports face headwinds

The sentiment across India’s manufacturing sector remains upbeat. But exports are facing headwinds amidst a challenging global environment. These are the key findings of a survey conducted by industry body Federation of Indian Chambers of Commerce & Industry (FICCI).

More than 400 respondents across nine sectors were polled to study the trends in the first quarter. Small, medium and large companies were all part of the survey which covered companies with a combined annual turnover of nearly Rs 8 lakh crore. 57 percent of those polled expect higher level of production in the April to June quarter. The average increase in production is likely to be in single digits. 58 percent of those polled say they have higher number of orders in the first quarter.

Domestic demand is largely driving growth as exports face challenges. Only 28 percent of those polled expect higher exports in first quarter. With growth slowing across developed economies, companies that rely heavily on exports are likely to struggle.

The optimism across the manufacturing sector is not uniform. The electronics and white goods industry is the most upbeat, expecting more than 20 percent growth in the first quarter.

Automobile, capital goods and construction equipment expect growth in the range of 10-20 percent. But, metals, textiles, apparels, toys and handicrafts expect moderate low single digit growth in the first quarter.

Need to be globally competitive

HP Singhania, VC & MD, JK Paper, noted that there was robust domestic demand across sectors amid a cooling off in input prices. “As global commodity prices or input prices have cooled off, there has been an effect on the domestic prices as well,” he said.

On the exports sector, he said that the global economy is seeing a slowdown and India is a bright spot as an exception. Yet Indian companies are not able to export as much. “It means they have to find a domestic market for that.”

Singhania also asserted that in order to thrive in the global market, it is crucial for India to focus on enhancing its competitiveness in terms of manufacturing costs. India holds great potential to significantly expand its presence in the global supply chain, offering ample opportunities for growth and development.

He said there is a need to focus on key factors such as the cost of finance, infrastructure, and labour policies. Additionally, the industry is actively exploring digitalization and embracing environmental, social, and governance (ESG) practices as part of its efforts to align with global standards.

Anish Shah, Senior VP, FICCI, MD & CEO, Mahindra Group, said despite global challenges, there is a prevailing sense of optimism within the industry, reflecting resilience and determination to overcome obstacles. Sectors such as cement and automobiles are operating at around 80 percent capacity utilisation, while the electronics industry stands at 77 percent.

The recent uptick in private investments, particularly in sectors like hotels, is a promising sign for economic expansion, he noted. It signals confidence in the market and underscores the potential for growth and job creation.

However, he noted that some catch-up is required in the electric vehicle (EV) segment. Efforts are underway to bridge this gap and enhance the adoption of EVs in India.

Manish Sharma, Chairman - India & South Asia, Panasonic Life Solutions, Head FICCI Panel On Electronics, White Goods, said that the methodical approach from Phased Manufacturing Policy (PMP) to Production Linked Incentive (PLI) scheme has played a significant role in creating the current favourable environment for industries.

He highlighted the spike in investment in the production of air conditioners (AC) since PLI scheme which had gone up to Rs 2,000 crore as against the expectation of Rs 1,000 crore, in order to meet the growing demand in the sector, as the current penetration remains at a dismally low 6 percent of Indian households.

He also noted that today, electronics industry has started to play a major role because electronics cut across almost every vertical and said that it was necessary to take steps to aggregate demand, and he sees the role of MSMEs in this area quite critical.

(Edited by : Pradeep John)

First Published:Jul 17, 2023 7:52 PM IST