India's apex body of business organisation, Federation of Indian Chambers of Commerce and Industry (FICCI) in its latest quarterly report on, manufacturing outlook for the second quarter has stated that India's manufacturing sector may witness higher growth during the July-September quarter due to improvement in export prospects and domestic demand, even as the hiring outlook remains subdued and the interest rate paid by the manufacturers remained high and sticky.
In the report based on survey drawn on the manufacturing outlook from the 308 manufacturing units from large, small and medium enterprises segments with a combined annual turnover of over Rs 4 lakh crore the respondents expected higher growth during July-September quarter, rising to 55 percent as against 53 percent for April-June quarter 2016-17, although, it remained much below the 60 percent for January-March quarter of the previous fiscal. Further it stated that the slight improvement in the outlook for manufacturing production in second quarter of 2016-17 is attributable to various factors including somewhat better outlook for exports compared to previous quarters, and better outlook on domestic demand front too.
Export outlook for manufacturing in September quarter improved slightly as against the expectations for the first quarter. It anticipated export in the second quarter likely to rise by 5 percentage points to 41 percent as against 36 percent in 2016-17. However, hiring outlook remains subdued in manufacturing in coming months as three quarters of the participants in second quarter of 2016-17 are unlikely to hire additional workforce in next three months and it remained almost similar to that recorded for June quarter that is 76 percent. Moreover, average interest rate paid by the manufacturers still reportedly remains high and sticky. The rate is as high as 15 percent with average interest rate at around 11.5 percent per annum.
The report further said that uncertain economic environment, unfavourable market conditions, competition from imports, delayed clearances, inadequate infrastructure (especially availability of power) and cost escalation are some of the major constraints affecting the expansion plans of the industry.