FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

FICCI QUARTERLY SURVEY

ON
INDIAN MANUFACTURING SECTOR

May 2014

FEDERATION OF INDIAN CHAMBERS OF COMMERCE & INDUSTRY

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

TABLE OF CONTENTS

Page No

Introduction & Quarterly Outlook for Manufacturing Sector

Automotive

Capital Goods

Cement Sector

10

Ceramics Sector

11

Chemicals and Fertilizers

12

Electronics & Electricals

14

Food Processing

15

Leather and Footwear

16

Machine Tools Industry

18

Metal and Metal Products

19

Paper

20

Textiles

21

Textiles Machinery

23

Tyre Industry

24

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Introduction & Quarterly Outlook for the Manufacturing Sector

Production and Demand

FICCIs latest quarterly survey gauges the expectations of manufacturers for Q-1 (April-June
2014-15) for fourteen major sectors namely textiles, capital goods, metals, chemicals,
cement, electronics, automotive, leather & footwear, machine tools, Food processing,
Paper, tyre, textiles machinery, ceramics and others. Responses have been drawn from 352
manufacturing units from both large and SME segments with a combined annual turnover
of over Rs 3.75 lac crore.

FICCIs latest Quarterly Survey on Manufacturing for first quarter of 2014-15, indicates
moderation in the manufacturing activity in Q-1 of 2014-15 as compared to Q-4 of 2013-14.
The outlook on the basis of FICCI Manufacturing Survey for Q-1 2014-15 is less optimistic
than in Q-4 2013-14 for the manufacturing sector. However, at the same time growth is
expected in Q-1.

This is also reflected in the Order books of the manufacturers. The demand seems to have
slowed down as a result of which moderation in manufacturing activity is expected. While
44% respondents reported higher order books for January-March 2013-14 quarter in the
last survey, but for this quarter only 36% respondents have reported higher order books for
April-June 2014-15.

This time it is just not domestic factors but more importantly on export front the outlook
seems to be weakening as a result of which manufacturing growth is likely to be pulled
down.
Quarter
Q-1 (2014-15)
Q-4 (2013-14)
Q-3 (2013-14)
Q-2 (2013-14)
Q-1 (2013-14)
Q-4 (2012-13)

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% of Respondents Expecting Higher Production in the

First Quarter vis--vis Respective Last Years Quarter
50%
56%
52%
48%
35%
36%

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Q-3 (2012-13)
Q-2 (2012-13)
Q-1 (2012-13)
Q-4 (2011-12)

45%
44%
46%
36%
Source: FICCI Survey

Capacity Addition & Utilization

In terms of investment, it remains subdued in manufacturing sector as was the case for
previous quarters also. Though, in terms of investment the outlook seems to be slightly
better than the previous quarters but it remains pessimistic. For Q-1 2014-15, 69%
respondents, as against 71% respondents in Q-4 and 72% respondents in Q-3 of 2013-14,
reported that they dont have any plans for capacity additions for the next six months. This
could hardly be construed as any upturn in investment activity as of now.

In many sectors, average capacity utilization has remained same in Q-4 of 2013-14 as was in
Q-3 of 2013-14. These are sectors like Capital Goods, Chemicals, Metals, Textiles Machinery,
Leather & footwear and Paper. On the other hand capacity utilization has slightly improved
in Q-4 like in Auto and Cement.
Table: Current Average Capacity Utilization Levels As Reported in Survey
Sector

Auto
Capital Goods
Cement
Chemicals &
Fertilizers
Textiles
Electronics &
Electricals
Food Processing
Leather & Footwear
Metals
Textiles Machinery
Tyre
Paper

Average Capacity
Utilisation (%) in Q4 2012-13
73
68
77
74.5

Average Capacity
Utilisation (%) in Q-1
2013-14
72
70
75
77

Average Capacity
Utilisation (%) in Q-2
2013-14
60
70
73
78

Average Capacity
Utilisation (%) in Q-3
2013-14
70
70
65
79

Average Capacity
Utilisation (%) in
Q-4 2013-14
73
70
72
80

81
58

80
56

78
60

83
60

79
75

80
73
66
NA
NA
NA

75
82
63
NA
NA
NA

86
71
70
60
60
NA

80
80
70
60
60
80

78
80
70
60
80
80

The current average capacity utilization as reported in the survey is around 76% for Q-4
2013-14 as against 74% in Q-3 of 2013-14 and 70% in Q-2 of 2013-14.

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Inventories

Looking at the inventory levels, currently around 29% respondents reported that they are
carrying more than their average levels of inventories (as compared to 32% in Q-4, 24% in
Q-3 and 26% in Q-2 of 2013-14) and another 58% are maintaining their average levels of
inventories (as compared to 52% in previous quarter).

Exports

Export outlook for manufacturing has weakened in Q-1 2014-15. In the previous survey,
outlook on export front remained positive and seemed to have improved somewhat in Q-4,
which does not seem to be the case now. The proportion of respondents expecting higher
exports in Q-1 2014-15 (April-June 2014-15) has fallen to 36% as against 58% in Q-4 (JanMar 2013-14) and 48% in previous quarter (Q-3) and 52% in Q-2 i.e. July-Sep 2013-14.

Hiring

Over 75% of the respondents are not likely to hire additional workforce in next three
months. This proportion is more than that of the previous quarter (70%), and overall the
manufacturing units are not expected to add significantly to their existing workforce in
coming months.

Interest Rate

Interest rate paid by the manufacturers ranges from 8 to 16% as per the survey with
average interest rate at around 12% per annum. 68% respondents are availing credit at over
12% average interest rates.

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Sectoral Growth

Based on expectations in different sectors, the Survey pointed out that five out of fourteen
sectors were likely to witness low growth (less than 5%). Only three sectors namely, leather,
chemicals and ceramics are expected to have a strong growth of over 10% in April-June
2014-15 and rest all the sectors likely to witness moderate growth.
Table : Growth expectations for Q-1 2014-15 compared with Q-1 2013-14
Growth
Sector
Expectation
Capital Goods
Automotive
Machine Tools
Cement
Steel & Metals

Low
Low
Low
Low
Low

Electronics & Electricals

Moderate

Tyre
Moderate
Paper
Moderate
FMCG/Food Products
Moderate
Textiles Machinery
Moderate
Textiles
Moderate
Chemicals
Strong
Ceramics
Strong
Leather & footwear
Strong
Note: Strong > 10%; 5% < Moderate < 10%; Low < 5% (Source: FICCI Survey)

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Automotive
Quarterly Outlook for the Sector at a Glance
Production

Exports

Inventory

Bleak Outlook

Bleak Outlook

Average levels of Expansion

not Bleak Outlook
inventory
expected in next
6 months

Investment
Expansion

for Hiring

Automotive sector especially the components segment has experienced slowdown in recent
times and more than 80% respondents in the sector reported lower or same level of
production in January - March 2014 vis--vis same quarter of 2013.

For the current quarter i.e. April - June 2014 also 67% respondents expect their production
level to either fall or remain at the same level as compared to the same quarter of previous
year. The order books also indicate slowdown in the sector as 83% respondents expect
lower orders in April June 2014 as compared to January March 2014.

On an average, the industry is operating at a capacity of 73% and majority do not have plans
to add further capacity over next six months.

Scenario seems to be somewhat same on exports front also with most of the respondents
reporting same or lower exports in January - March 2014 and April June 2014 vis-a-vis
respective quarters of January March 2013 and April June 2013.

Majority of the respondents reported to be maintaining their average inventory levels in

January - March 2014 quarter.

Profit margins have also been falling for some respondents in January March 2014 as
compared to the same quarter of last year.

More than 80% respondents do not have any plans to hire additional workforce.

The units in the sector reported that they are getting credit in the range of 9-14%.

The industry doesnt expect the manufacturing sector to worsen further in near future as
most of them expect the sector to either revive or continue to grow at the same level. The
sector has suggested that following issues need to be addressed to revive industrial growth:

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Improve liquidity in the market

Reduce interest rates & bring down inflation
Increase infrastructure spending
Introduce new incentive schemes

Some of the significant constraints for the sector are uncertainty of economic environment
and lack of domestic demand.

Capital Goods
Quarterly Outlook for the Sector at a Glance
Production

Exports

Inventory

Slight
Improvement
Expected

Bleak Outlook

Average levels of Expansion

not Bleak Outlook
inventory
expected in next
6 months

Investment
Expansion

for Hiring

Half of the respondents reported slight improvement in their production for January
March 2014 quarter vis--vis January March 2013 whereas 30% respondents reported fall
in their production.

Similar situation seems to be prevailing in the current quarter i.e. April - June 2014 as well
with 50% respondents expecting improved but subdued growth in production level vis--vis
April June 2013.

90% respondents have reported that their order books are likely to either improve or
remain same during April - June 2014 as compared to January - March 2014 quarter.

Currently, the capacity utilization in the sector as reported is hovering at 70% and for
around 45% respondents the capacity utilization is more than that of previous year. Around
70% respondents reported that they do not have any plans to add capacity in next 6
months. Some of the problem areas mentioned by industry are as follows:
Shortage of skilled labour
Unfavourable market sentiments

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Substantial increase in competition due to higher production capacity and reduction

in orders particularly from the industrial sector

For 40% of the respondents, exports were less in January - March 2014 vis--vis the same
quarter last year. Another 40% reported higher level of exports in this period. For April June 2014 quarter 60% respondents expect exports to remain unchanged as compared to
April June 2013.

Inventory levels are neither too high nor low and 60% respondents seem to be maintaining
their average inventory levels.

Half of the respondents have reported decline in their profit margins whereas the other half
have declared increased profit margins for January March 2014 vis--vis January March
2013.

Around 64% respondents in this sector indicated that they are not planning to hire new
workforce. Rest, reported plans of hiring workforce in the range of 5-15%.

On an average, the industry reported to be availing credit at an interest rate of around

13.5%.

Capital Goods sector is not very hopeful of recovery in manufacturing growth rate in near
future as only 20% respondents expect a revival in the sector. 72% respondents expect that
the growth would remain at the same level in the coming months. However, following
suggestions have been proposed to revive growth in the sector:
Raw material availability at reasonable cost
Incentives for infrastructure projects and cold chain segments
Speedy GST implementation
Measures to improve quality education so that employable labour and technical skill
is available
Reduce interest rates

Increased competition faced from imports, uncertainty of economic environment, lack of

domestic & export demand and volatility in prices of raw material are some of the
important constraints for the sector which are affecting its growth. Respondents also
mentioned that poor road infrastructure makes it difficult to transport heavy equipments.

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Cement Sector
Quarterly Outlook for the Sector at a Glance

Production

Exports

Inventory

Improvement
Expected

Improvement
Expected

Average levels
of inventory

Investments for
Expansion
Capacity addition
expected in next 6
months

Hiring
Not much change
in outlook

In this sector also, outlook seems to be improving. 80% respondents reported higher output
in the January- March 2014 quarter vis--vis last year. Growth is likely to continue in
Cement Sector in the April- June quarter as 80% respondents expect same or higher
production levels vis--vis last year.

Around 60% respondents have reported that their order books are likely to see an
improvement in April- June 2014 compared to previous quarter.

Capacity utilization is hovering around 72% in cement sector, which is more than that of last
year for 60% respondents. Majority of the firms are planning to add capacity in next six
months by 3-13%. Cement producers are facing problems in getting various clearances for
their projects like mining leases, land acquisition, environment and forest clearances.

While exports are not significant part of the industry but for half of the respondents,
exports of cement have improved in January- March 2014 compared to last year. Scenario is
likely to remain same in April- June 2014 as half of the respondents are expecting higher
exports and other half is expecting lower exports.

For almost all the respondents, their inventory level is same as their average inventory level.

Most of the firms in cement sector are not planning to hire new work force in next three
months and only a few are planning to increase their workforce that too only marginally.

More than half of the respondents in cement sector believe that the growth rate of
manufacturing is likely to remain at same level in coming months of 2014 whereas another
40% are of the view that the sector may revive in coming months. Following steps need to
be taken by Government to enhance growth of the sector:

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More investments in public infrastructure sector is required to boost demand for

cement and also there is a need to speed up project clearances
Interest rates need to be reduced
Exchange rate stability
Government should reduce interest rates on housing loans to give a boost to the
sector

High prices of raw materials, deficiency of power, sluggish domestic demand and uncertain
economic environment are acting as significant constraints for the sector. Some of the
respondents reported deficiency of raw materials, labor related issues, low export demand
and inadequate availability of skilled labor as factors moderately affecting their growth.

Ceramics Sector
Quarterly Outlook for the Sector at a Glance

Production

Exports

Inventory

No growth
expected

Bleak Outlook

Higher than
average levels

Investments for
Expansion
Expansion not
expected in next 6
months

Hiring
Bleak outlook

All the respondents reported same or increased levels of production in January- March 2014
vis--vis the same quarter last year. Scenario is likely to be same in April- June quarter with
all the respondents expecting same or increased production compared to 2013.

However, all the respondents have reported that their order books are likely to see a fall in
April- June 2014 compared to the previous quarter which means growth could slow down in
next few months.

Capacity utilization stands at 80% in the ceramics and Refractories sector, which is same as
that of last year for 50% respondents and more than last year for another 50%. Majority of
firms are not planning to add capacity in next six months.

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Export outlook remains bleak. Ceramic exports have fallen for 50% respondents and have
remained same for another 50% in January- March 2014 compared to last year. Exports are
likely to fall compared to last year in April- June 2014 quarter.

For all the respondents, inventory of finished goods for the current quarter i.e. JanuaryMarch 2014 is higher than their average inventory levels.

Majority of the reporting firms in the ceramics sector are not planning to hire new work
force in the next three months.

Around 50% of the respondents in the ceramics sector believe that the growth rate of
manufacturing is likely to revive in next six months. Following are the suggestions for the
Government to enhance growth of the sector:
Investment in the infrastructure sector
Ensure continuous power supply and fuel supply

Inadequate power is acting as a significant constraint for the sector. Other issues which are
affecting growth of cement sector are high prices of raw materials, labor related issues,
shortage of finance, sluggish domestic and export demand, competition faced from imports,
uncertain economic environment and lack of skilled labor.

Chemicals and Fertilizers

Quarterly Outlook for the Sector at a Glance

Production

Exports

Inventory

Improvement
expected

Improvement
expected

Average levels
of inventory

Investments for
Expansion
Expansion not
expected in next 6
months

Hiring
Bleak outlook

83% respondents reported either same or higher output in the January- March 2014 vis-vis the same quarter last year. Scenario is likely to improve in April- June 2014 as all the
respondents are expecting same or higher output compared to April- June 2013.

83% respondents are expecting either same or higher number of orders in April- June 2014
in comparison to the last quarter (January- March 2014).

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Capacity utilization stands at 80% for this sector. Currently, the capacity utilization is higher
than last year for 42% of the respondents. Majority of the manufacturers are not planning
to add capacity in next 6 months. Chemicals and fertilizer producers are facing delay in
getting environment clearances in capacity addition.

63% of the respondents reported exports in January- March 2014 were either same or
higher in comparison to January- March 2013. Exports are likely to improve in April- June
2014 as 75% of the exporters are expecting same level or growth in exports vis--vis the
year ago quarter.

For 73% respondents, the inventory of finished goods is the same as their average level. For
another 18%, inventory level is lower than their average inventory level.

Most respondents are not planning to hire additional workforce in next 3 months.

For some manufacturers in chemicals and allied sector credit is available at rate of interest
as high as 14%.

50% of the respondents feel that the growth rate of manufacturing sector will continue to
remain at same level in coming months while the rest of them are hopeful that the growth
rate would revive in coming months. Following measures are required to revive growth:
Exchange rate stability
Interest rate needs to be lowered & liquidity needs to be improved
Fast track clearances from various Government authorities especially environment
clearances
Early implementation of GST
Improvement in infrastructure, in particular port infrastructure

High prices of raw materials and uncertain economic environment are significantly affecting
growth of the sector.

Deficiency of raw materials, deficiency of power, labor issues, shortage of working capital,
lower domestic and export demand, competition from imports and availability of skilled
manpower are amongst the other constraints affecting the growth in this sector.

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Electronics & Electricals

Quarterly Outlook for the Sector at a Glance
Production

Exports

Inventory

Bleak outlook

Bleak outlook

Average levels of Expansion not

inventory
expected in next
6 months

Investment
Expansion

for Hiring
Bleak outlook

60% respondents reported same or lower production levels in January - March 2014 in
comparison to the same quarter of last year. On an average the decrease is reported to be 5.5%. Outlook for current quarter has not changed much with majority expecting same or
lower production levels in April - June 2014 quarter vis--vis same quarter of last year. The
expected fall in production is reported to be around 2%.

50% respondents expect higher number of orders in April - June 2014 in comparison to
January - March 2014.

Current capacity utilization is around 75% for electronics industry and 70% respondents do
not have any plans to add any fresh capacity in next few months.

Most of the respondents reported either lower or flat growth in exports in January - March
2014 and April - June 2014 quarters as compared to the respective quarters of last year.

60% respondents have maintained average inventory levels during January March 2014.

72% respondents reported no plans of hiring additional work force in next 3 months. The
rest are planning to hire in the range of 6-10%.

On an average the electronics industry respondents are getting credit at 12%.

75% Respondents in electronics sector expect the manufacturing sector to continue

growing at the same level in the next six months. FTA remains an area of concern for this
sector and industry respondents have sought review of FTAs in some cases and also pressed
for stricter enforcement of rules of origin to prevent circumvention. Following other
suggestions were made:
Reduce cost of capital by lowering interest rates
Improved availability of credit

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Aggressive push to infrastructure development

Hardening of raw material prices, lack of domestic and export demand are significantly
affecting the growth of this sector.

Food Processing
Quarterly Outlook for the Sector at a Glance

Production

Exports

Inventory

Improvement
expected

No growth
expected

Average levels

Investments for
Expansion
Capacity addition
expected in next 6
months

Hiring
Improvement
expected

Almost all the respondents in food processing sector reported growth in production in
January- March 2014 compared to the same quarter last year. Production is likely to grow in
April- June 2014 quarter also as again all the respondents are expecting same or higher
production vis--vis last year.

Order books of all the food processing firms are likely to remain same or show an
improvement in April- June compared to January- March 2014 quarter.

Capacity utilization stands at 78% in food processing sector and is higher than last year for
half of the firms. Also, 50% firms are planning to increase their capacity in next six months.
For half of the respondents, exports were higher in January- March 2014 vis--vis the same
quarter last year. In April- June 2014, scenario is likely to remain same as again 50%
respondents are expecting an increase in exports as compared to last year.

For all the respondents their current inventory level is same as their average inventory level.

50% of the respondents in food processing sector are planning to hire new workforce in
next three months by 10%.

Credit is available to food sector at the rate of interest ranging between 8.75-11%.

According to most of the respondents, growth in manufacturing sector is likely to remain at

same level in 2014. Following suggestions were made by respondents from the sector on
Policy front to revive growth :

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FICCI QUARTERLY SURVEY ON INDIAN MANUFACTURING SECTOR

Need for uninterrupted and adequate power supply

Reduce electricity tariffs
Easier credit facility with lower interest rates
Reform in Labor laws

Food Processing firms are having problems in production since prices of raw materials are
rising and due to shortage of skilled labor. Though moderately, food processing are affected
by the following factors also:
Deficiency of raw materials
Deficiency of power
Labour related issues
shortage of working capital
Competition faced from imports
Uncertain Economic Environment

Leather and Footwear

Quarterly Outlook for the Sector at a Glance

Production

Exports

Inventory

Improvement
expected

Improvement
expected

High levels of
inventory still
continuing

Investments for
Expansion
Capacity addition
expected in next 6
months

Hiring
Improvement
expected

Leather is another segment of manufacturing that has shown improvement over the last
few months. 80% respondents in leather and footwear sector reported either same or
higher output in the January- March 2014 vis--vis the same quarter last year. Leather and
Footwear sector is likely to see further growth in the current quarter April June 2014 as all
the respondents are expecting higher production vis--vis April June 2013.

Order books of almost all respondents are likely to show a rise in April June 2014
compared to previous quarter.

The average capacity utilization in this sector is reported to be 80% in January- March 2014
which is more than that of last year for 80% of the respondents. Around 80% of the

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respondents are planning to add capacity in next six months and addition is likely to be in
the range of 10-40%. Leather and footwear producers are facing following constraints in
capacity addition:
Shortage of working capital finance
Labor issues

During January- March 2014, exports of 60% of the respondents registered a growth.
Scenario is likely to improve in April June 2014 quarter as all the respondents are
expecting either higher or same exports vis--vis the same quarter last year.

Despite improvement in outlook, inventory level of 60% of the respondents is higher than
their average inventory level. Rest of the respondents reported either same or lower
inventory levels.

Majority of the firms in leather sector reported that they are planning to expand their
workforce in next three months. Some have reported that they are looking at increasing
workforce by around 14%.

Firms in the sector reported to be availing credit at the rate of interest as high as 15%.

60% respondents in the sector expect same level of growth in manufacturing sector in
coming months of 2014. However, following issues need to be addressed by Government to
revive growth:
Delays in VAT refund
Simplification and rationalization of labor laws
Easier credit facility with lower interest rates for SMEs
Stable power supply
Stabilization of inflation
Exchange rate stability
Animal farming to be supported by Government to provide feedstock for the sector

Firms in leather and footwear sector are significantly constrained by high prices of raw
materials and deficiency of raw materials, shortage of working capital finance, labor related
issues, uncertainty of economic environment and availability of skilled manpower. Another
factor acting as impediment for leather sector is inadequate power.

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Machine Tool Industry

Quarterly Outlook for the Sector at a Glance
Production

Exports

Inventory

Investment
Expansion

Improvement
Expected

Improvement
Expected

Not reported

Not reported

for Hiring
Not reported

Most of the respondents reported lower levels of production in January - March 2014
quarter as compared to previous year. But, in the current quarter i.e. April - June 2014,
respondents are expecting an increase in production levels by 2-5% as compared to the
same quarter of previous year. This has also been reflected in the order books of the
respondents with most of them expecting their order books to improve for the quarter April
- June 2014 compared to January - March 2014.

Scenario is slightly better on exports front. Majority of the respondents reported that
Machine Tools exports for January - March 2014 were higher by 5% than exports of January
March 2013. For April - June 2014 also, exports are likely to be higher as compared to the
corresponding quarter of the previous year. The increase is expected in the range of 5-8%.

Majority of the respondents have a positive outlook for the growth rate of manufacturing
sector in the coming months.

Some of the significant constraints for this sector are shortage of working capital finance,
deficiency of power, lack of domestic demand, competition faced from imports, lack of
skilled labour and uncertainty of economic environment.

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Metal and Metal Products

Quarterly Outlook for the Sector at a Glance
Production

Exports

Inventory

Investment
Expansion

for Hiring

No
growth No
growth Average levels of Expansion
not Bleak Outlook
expected
expected
inventory
expected in next
6 months

55% respondents from this sector reported either lower or same levels of production in
January - March 2014 quarter as compared to same quarter of previous year. For the
current quarter i.e. April - June 2014, more than 70% respondents are expected to witness
same growth levels as of April - June 2013.

More than half of the respondents are expected to receive same number of orders in the
quarter April - June 2014 compared to the last quarter (i.e. January - March 2014).

Currently, the industry is operating at an average capacity utilization of 70% and for 55%
respondents it is same as that of last years capacity utilization. Around 90% respondents
reported that they are not planning to increase their capacity in next 6 months. Key
problem areas mentioned by respondents were:
Shortage of power and low demand
Raw material shortage and high prices of raw material

In January - March 2014 quarter, 50% respondents have reported same levels of exports vis-vis January - March 2013 and similar situation seems to be prevailing in the current
quarter also.

55% respondents reported that they expect to maintain average inventory levels for April June 2014.

70% respondents reported that they do not have any plans to hire new workforce in next 3
months.

There has been mixed response on profit margins. While some respondents have
experienced increase in their profit margins, there are some who have reported loss for
January March 2014 quarter as compared to profit in January March 2013.

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On an average, the respondents reported to be availing credit from the banks at over 13.5%
p.a. rate of interest.

Close to 75% respondents feel that growth rate will remain at the current levels in coming
months. However, the industry suggested the following to revive growth of the sector:
Lower interest rates and power rates.
Infrastructure development
Improve power and raw material availability to the industry.
Faster clearances of projects at State and Central government level
Exchange rate stability

Most of the respondents feel high prices of raw materials, deficiency of raw material and
power, lack of domestic demand and uncertainty of economic environment as the most
important constraints for the industry.

Paper
Quarterly Outlook for the Sector at a Glance
Production

Exports

Inventory

Improvement
expected

Improvement
expected

High levels of
inventory

Investments for
Expansion
Capacity addition
expected in next 6
months

Hiring
Bleak outlook

In January- March 2014, production for paper sector was higher than that of last year.
Production is likely to be higher in the current quarter, April- June 2014 and register a
growth of 10% vis--vis April- June 2013.

Order books of paper manufacturers are likely to remain same in April- June 2014 as
January- March 2014 quarter.

Capacity utilization stands at 80% in paper sector which is more than that of last year for
most of the producers. Also, most of the producers are planning to expand their capacity in
next few months by as much as 10%.

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Paper exports were higher in January- March 2014 as compared to the same quarter last
year. In April -June 2014 quarter respondents in this sector are expecting significantly higher
exports than last year.

The inventory level in paper sector is higher than their average inventory level.

Most respondents in the paper industry are not planning to hire workforce in near future.

Paper manufacturers reported to be availing credit in the range of 10 -12% rate of interest.

Paper manufacturers expect the same level of manufacturing growth in coming months of
2014. It has suggested that infrastructure development and faster decision making at
Government level can revive manufacturing sectors growth rate.

Deficiency of raw materials, high prices of raw materials, lower domestic demand,
competition faced from imports, un-availability of skilled manpower and uncertainty of
economic environment are significantly constraining paper manufacturers. Shortage of
finance and low export demand are also affecting the paper industry.

Textiles
Quarterly Outlook for the Sector at a Glance
Production

Exports

Inventory

Improvement
Expected

Bleak
outlook

Average
levels of
inventory

Investments for
Expansion
Expansion not expected
in next 6 months

Hiring
Not much
improvement
expected

Over the last few months, this is one sector which has shown some improvement. In
January- March 2014, 90% respondents in textiles sector reported increased or same
production levels. Again, 90% respondents are expecting same or higher production in AprilJune 2014 implying that the situation will remain same vis--vis the last quarter.

In April- June 2014, 65% of textile respondents are expecting either same or higher number
of orders as in January- March 2014 indicating a recovery in demand conditions.

Average capacity utilization is hovering around 79% in textiles sector with almost half of the
respondents operating at a capacity utilization of more than that of last year. However,

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majority of respondents (75%) are not planning to increase their capacity in next 6 months.
A few are planning to increase their capacities by over 10%. Firms in textiles sector are
facing following problems in adding capacity:
Shortage of skilled manpower
Power shortage
High cost of capital
Uncertainty in market conditions

58% respondents reported that their exports in January- March 2014 were higher than the
same quarter last year. In April- June 2014 exports are likely to see a dip as only 32%
respondents are expecting higher exports vis--vis last year. Export outlook looks bleak at
least on immediate basis.

75% of the respondents in textiles sector have reported that their current inventory level is
same as their average inventory level. Another 20% respondents have reported higher
inventory.

75% of the respondents are not planning to hire new workers in next three months and rest
of the respondents are planning to increase workforce by 5%.

Cost of credit remains high with manufacturers reported getting credit at the rate of 1015.7%.

Half of the respondents are expecting manufacturing growth to remain at same level and
another twenty percent are hopeful that it would revive in coming months. But following
suggestions are made to enhance growth:
Easy availability of finance at lower interest rates
Improved power supply at reasonable rates
Amend labour laws to make them industry friendly especially for seasonal industry
like garments
Need to have a strong focus on improving infrastructure & utilities like Ports
Exchange rate stability
Export packing credit subvention should be allowed to yarns on the lines of garment
industry

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Units

in

textiles

sector

are

significantly

affected

by

high

prices

of

raw

materials/intermediates, deficiency of power, lack of skilled manpower, low export demand

and uncertainty of economic environment. Other issues faced by textile sector are shortage
of finance, labour related issues, low domestic demand and competition from imports.

Textile Machinery
Quarterly Outlook for the Sector at a Glance
Production

Exports

Improvement in No growth
Outlook

Inventory

Investment
Expansion

for Hiring

Higher
than Expansion
not Bleak Outlook
Average levels
expected in next
6 months

Almost all the respondents in textile machinery sector have reported an increase in
production for January March 2014 quarter vis--vis same quarter in 2013. The situation
seems to be continuing in the current quarter i.e. April - June 2014 also. The increase in
production is expected to be around 5-10 %.

However, on exports front the situation remains status quo for both January - March 2014
quarter and April - June 2014 quarter as compared to corresponding quarters of 2013.

No change is expected in the order books of most of the respondents in April - June 2014 as
compared to January - March 2014 quarter.

The current capacity utilization in the sector is in the range of 50-70% which is same as that
of last year for most of the respondents. Also, respondents from textile machinery industry
do not have plans to add capacity in next six months.

Most of the respondents reported that they have maintained higher inventory levels than
the average level during January March 2014.

Respondents in this sector have reported that they have no plans to hire new workforce in
next 3 months.

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Majority of the respondents in the sector believe that growth rate of manufacturing sector
is going to remain at the same level for next few months.

Some of the major challenges for this sector are increased competition faced from imports
and lack of skilled labour.

Tyre Industry
Quarterly Outlook for the Sector at a Glance
Production

Exports

Subdued
Increase
expected

Improvement in Not reported

Outlook

Inventory

Investment
Expansion

for Hiring

Expansion
not Bleak Outlook
expected in next
6 months

For January - March 2014 quarter, most of the respondents reported higher, though
subdued, production as compared to January - March 2013. In the current quarter i.e. April
June 2014 also, production is expected to slightly increase vis--vis April - June 2013
mainly due to better performance on exports front.

The capacity utilization for respondents in tyre industry is in the range of 80-90%. It is more
or less same as that of last year for most of the respondents. Also, majority of respondents
are not planning to add capacity in next 6 months.

On exports front, most of the respondents reported either an increase or same level for
both January March 2014 and April June 2014 as compared to same quarters in 2013. In
April - June 2014 quarter, tyre manufacturers expect an increase of 10% on an average as
compared to same quarter of 2013.

The tyre industry is not planning to hire additional workforce in next 3 months as per the
respondents.

Respondents in this sector are getting credit in the range of 9-10%.

Most of the respondents in the sector believe that manufacturing growth rate is expected
to either revive or remain at same level in the coming months.

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Tyre sector is significantly constrained by labour related issues, low domestic demand and
uncertainty in economic environment.

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