With the coronavirus pandemic and the resultant nationwide lockdown bringing a severe slowdown in the economy, a survey by FICCI has shown that only 10 per cent of the respondents in the manufacturing sector reported an increase in production in the first quarter of fiscal 2020-21.
“The percentage of respondents reporting higher production in the first quarter of 2020-21 has fallen significantly vis-a-vis the Q4 of 2019-20. The proportion of respondents reporting higher output during April-June 2020 fell to just 10 per cent compared with Q4 of 2019-20 (15 per cent),” said the FICCI’s latest quarterly survey, painting a dismal scenario compared with previous few quarters of 2019.
The survey elicited responses from over 300 manufacturing units in both large and SME segments with a combined annual turnover of over Rs 2.5 lakh crore.
The percentage of respondents expecting low or same production is 90 per cent in Q1 2020-21, which was 85 per cent in Q4 of 2019-20.
The overall capacity utilisation in manufacturing has witnessed a decline to 61.5 per cent in Q4 2019-20 compared with 76 per cent in Q3 2019-20, as per the survey.
The future investment outlook looks subdued as only 22 per cent respondents reported plans for capacity additions in the next six months compared with 28 per cent in the previous quarter.
High raw material prices, high cost of finance, uncertainty in demand, shortage of skilled labour and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown to contain spread of coronavirus etc are some of the major constraints affecting the expansion plans of the respondents.
The average capacity utilisation for Q4 2019-20 has decreased for all sectors, except medical devices as well as metals and metal products, wherein average capacity utilisation has remained the same in Q4 of 2019-20 compared to Q3 2019-20.
Further, the FICCI survey also showed that in certain areas like automotive, textiles machinery and leather and footwear firms are looking at alternative sources of inputs and raw material.
In terms of back-to-business status, the survey noted that on an average, firms are operating (depending on sectors) between 28 to 63 per cent of their capacities with a workforce deployment ranging from 33 to 57 per cent.
This assessment is also reflective in order books as 85 per cent of the respondents in April-June 2020-21 expected lesser orders as against 54 per cent in January-March 2019.
