India sees uptick in manufacturing sentiments, domestic demand in April-June: Survey

New Delhi, July 26: As the Union Budget 2024-2025 gives special attention to labour-intensive manufacturing, a new survey said on Friday that manufacturing sentiments in the country have shown an improvement in the April-June quarter.

According to FICCI’s ‘Quarterly Survey on Manufacturing,’ nearly 78 per cent of respondents in the Q1 FY25 expect either higher or unchanged production levels, compared to the same period last year.

It also highlighted optimism in domestic demand conditions for Q1 as nearly 67 per cent of respondents expect a higher number of orders compared to the previous quarter.

The survey indicated that demand conditions continue to be strong and may get a further boost with the progress of the monsoons.

The budget allocation for infrastructure, the rural sector and the thrust on employment generation schemes are seen as big moves which will boost economic activity and boost consumption. The tax breaks for the middle class announced in the Budget also put more money in the hands of the consumer, said the survey.

The existing average capacity utilisation in manufacturing is close to 75 per cent which reflects sustained economic activity. The future investment outlook is also positive, with 41 per cent of respondents indicating plans for investments and expansions in the next six months, the survey noted.

According to the FICCI survey, most sectors do not face a shortage of labour, as 83 per cent of respondents reported no issues with workforce availability. However, 17 per cent noted a lack of skilled labour in their sector, indicating a need for increased efforts at both government and industry levels.

According to the findings, factors contributing to higher production costs include increased prices for raw materials such as iron, steel, rubber, carbon, and chemicals, rising wages, increased utility and energy costs, higher scrap prices, and greater logistics expenses.

In the Budget 2024, the government has formulated a package covering financing, regulatory changes and technology support for MSMEs to help them grow and also compete globally, as mentioned in the interim budget.

The proposals for customs duties intend to support domestic manufacturing, deepen local value addition, promote export competitiveness, and simplify taxation, while keeping the interest of the general public and consumers surmount.

The government underlined nine thrust areas in the Budget, along with manufacturing and services.

The top priority of the Modi government is employment generation and the manufacturing sector is going to play a key role.

Another survey indicated this month that the business activity accelerated to a three-month high in July as the services sector surged and manufacturing picked up momentum leading to companies hiring at the fastest pace in 18 years.

The HSBC survey said the rise in output in July was led by a further increase in business activity in the manufacturing sector, while the pace of expansion in services output also accelerated and remained well above its long-run average.

The country has emerged as the fastest-growing major economy in the world, clocking a growth rate of more than 8 per cent in 2023-24.