The latest quarterly survey on manufacturing by the Federation of Indian Chambers of Commerce and Industry (FICCI) points towards recovery of the manufacturing sector for the second quarter (Q2) of fiscal 2020-21 compared to the previous quarter. The proportion of respondents reporting higher output during July-September 2020 rose to 24 per cent compared to 10 per cent in Q1.

The percentage of respondents expecting low or same production is 74 per cent in Q2; it was 90 per cent in Q-1 of 2020-21.

The survey covered several areas of relevance for manufacturing like exports, capacity utilisation, ongoing restrictions and availability of workforce. In many of these areas, there are signs of operations inching towards normal and in coming months could see better performance, the survey found.

The twelve major sectors covered are textiles, textile machinery, automotive, capital goods, cement and ceramics, chemicals, fertilisers and pharmaceuticals, electronics and electricals, leather and footwear, medical devices, metal and metal products, paper products and miscellaneous.

Responses were drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of around Rs 3 lakh crore.

The average capacity utilisation for the first quarter of fiscal 2020-21 has increased in the textile sector.

The overall capacity utilization in manufacturing has witnessed a rise to 65 per cent compared to 61.5 per cent in Q4 2019-20.

The future investment outlook, however, is subdued as only 18 per cent respondents reported plans for capacity additions for the next six months as compared to 22 per cent in the previous quarter.

High raw material prices, high cost of finance, 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, uncertain demand scenario across globe, complex procedures for obtaining environmental clearances, high power tariff, are some of the major constraints that are affecting expansion plans of the respondents.

Seventy-seven per cent of the respondents had either more or same level of inventory in July-September 2020, whereas around 74 per cent of them maintained either more or the same level of inventory in April-June quarter of 2020-21, FICCI said in a press release.

The percentage of respondents expecting increase in exports in Q2 has increased substantially to 24 per cent compared to Q1, wherein merely 8 per cent respondents expected a rise in exports. Also, 19 per cent are expecting exports to continue to be on same path as that of same quarter last year