Sentiment in manufacturing sector remains subdued in Q1FY20: FICCI

The Federation of Indian Chamber of Commerce and Industry (FICCI) in its quarterly survey has found that sentiment in the manufacturing sector remains subdued as the proportion of respondents reporting higher output growth during Q1 (April-June) of 2019-20 has dropped to 41 percent as against 54 percent  in January-March (Q4) of 2018-19. It noted that the percentage of respondents expecting low or static production is 59 percent in the first quarter of 2019-20, which was 46 percent in the previous quarter.

According to the survey, in terms of order book, 36 percent of the respondents during the quarter under review are expecting higher number of orders against 44 percent in the fourth quarter of the last financial year. It also noted that 86 percent of the respondents are expecting either more or same level of inventory in April-June 2019, substantially higher than 69 percent in Q1 of 2018-19. This has been largely due to subdued domestic and export demand. It also cited a moderate outlook for exports as 34 percent of the participants expect a rise in outward shipments for April-June and 27 percent estimate exports to continue to be on similar path as the same quarter last year. However, exchange rate fluctuations have not led to any significant change in exports as 79 percent of the respondents reported that the exports were not affected much by rupee fluctuation.

FICCI further stated that the recent cut in repo rate by Reserve Bank of India (RBI) should come as a relief for the industry if banks pass it on and it expects more reduction in the rates in coming months to drive investments. It noted that cost of production as a percentage of sales for manufacturers has risen for 63 percent of its respondents, which is significantly lower than 72 percent  for Q4 of 2018-19. It pointed out that this is primarily due to increased cost of raw materials, wages, power cost, rising crude oil prices and increase in finance cost.