A recent survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) has revealed an optimistic outlook for India’s manufacturing sector with 42% of respondents indicating plans for investments and expansions over the next six months. The survey which assessed the performance of the manufacturing sector for the third quarter (October-December) of 2024-25, highlighted sustained economic activity with an average capacity utilisation of around 75%.
Key Findings of the Survey
- Positive Investment Outlook:
The survey, which covered eight major sectors including automotive, capital goods, chemicals, electronics, and textiles, found that 42% of manufacturing companies are planning to invest in capacity expansion and modernization. This reflects confidence in the sector’s growth potential despite global and domestic challenges. - Strong Domestic Demand:
Domestic demand remains robust, with 83% of respondents expecting higher order volumes in Q3 FY25 compared to the previous quarter. This optimism is driven by improved economic conditions and government initiatives aimed at boosting manufacturing. - Export Growth:
Export performance has also been encouraging, with 65% of respondents reporting higher exports in Q2 FY25. For Q3 FY25, over 70% of manufacturers anticipate increased export volumes compared to the same period last year. - Employment Opportunities:
The survey indicated that 35% of respondents plan to hire additional workforce in the next three months, signaling job creation and economic growth in the sector.
Challenges Facing the Sector
Despite the positive outlook, the survey identified several challenges that could hinder growth:
- Rising Raw Material Costs: Increasing input costs are putting pressure on profit margins.
- High Interest Rates: Elevated borrowing costs are creating financial challenges for manufacturers.
- Market Uncertainties: Weak domestic and export demand in some segments are contributing to market volatility.
However, the survey noted that measures announced in the Union Budget 2024-25 could help mitigate some of these challenges and provide a boost to the sector.
Sector-Wise Performance
The FICCI survey assessed the performance of eight key manufacturing sectors:
- Automotive & Auto Components
- Capital Goods
- Chemicals, Fertilizers & Pharmaceuticals
- Electronics & Electricals
- Machine Tools
- Metals & Metal Products
- Textiles, Apparels & Technical Textiles
- Miscellaneous
Responses were collected from manufacturing units across both large and SME segments, representing a combined annual turnover of over Rs 4.7 lakh crore.
Inventory and Production Trends
The survey revealed that more than 75% of respondents expect higher or stable inventory levels in Q3 FY25, indicating confidence in future demand. Additionally, manufacturers are optimistic about production levels, with many planning to ramp up output to meet growing orders.
Government’s Role in Driving Growth
The Indian government has been actively working to boost private investments in the manufacturing sector, which is expected to strengthen overall GDP growth. Despite an estimated slowdown in GDP growth to 6.4% in 2024-25, the manufacturing sector remains a key driver of economic activity.
Conclusion
The FICCI survey underscores the resilience and potential of India’s manufacturing sector, with a significant proportion of companies planning investments and expansions. While challenges such as rising costs and market uncertainties persist, the sector’s positive outlook, driven by strong domestic demand and export growth, highlights its critical role in India’s economic recovery and growth trajectory. With supportive government policies and continued private sector participation, the manufacturing sector is poised to contribute significantly to India’s journey toward becoming a global manufacturing hub.
