Hiring outlook in manufacturing sector still bleak: FICCI Survey

The outlook for hiring in the manufacturing sector has marginally improved but the sentiments still remain weak, according to a survey by FICCI.

The latest quarterly survey of the sector for July-September showed that 80 per cent of the respondents said that they are not likely to hire additional workforce in the next three months.

“This presents a slightly improved situation in the hiring scenario as compared to the previous quarter Q1 of 2020-21, where 85 per cent of the respondents were not in favor of hiring additional workforce,” it said.

The manufacturing sector witnessed some recovery during the July-September quarter compared to the preceding quarter, according to the survey.

The percentage of respondents reporting higher production in second quarter of 2020-21 increased in comparison to the first. The proportion of respondents reporting higher output during July-September rose to 24 per cent, as compared to 10 per cent in Q1 of 2020-21.

The percentage of respondents expecting low or same production is 74 per cent in Q2 2020-21, as against 90 per cent in Q1 of 2020-21.

The overall capacity utilisation in manufacturing has witnessed a rise to 65 per cent as compared to the preceding two quarters. During the first quarter of the current fiscal, manufacturing, other than the essential goods, was nearly halted and in the fourth quarter of FY20, capacity utilisation was recorded at 61.5 per cent.

The survey, however, found that the future investment outlook is subdued as only 18 per cent respondents reported plans for capacity additions for the next six months as compared to 22 per cent in the previous quarter.

Further, high raw material prices, high cost of finance, shortage of skilled labour and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown across all countries to contain spread of coronavirus, along with other factors have been major constraints affecting expansion plans of manufacturing businesses.

The FICCI survey showed that around 77 per cent of the respondents had either more or same level of inventory in July-September 2020, whereas around 74 per cent of the respondents maintained either more or same level of inventory in April-June quarter of 2020-21.

The export outlook improved during the quarter under review.

The percentage of respondents expecting increase in exports in Q2 2020-21 has increased substantially to 24 per cent when compared to Q1 2020-21, wherein merely 8 per cent respondents were expecting a rise in exports. Also, 19 per cent are expecting exports to continue to be on same path as that of same quarter last year, it showed.

Average interest rate paid by the manufacturers has reduced slightly to 9.2 per cent per annum as against 9.4 per cent during last quarter and the highest rate is reported to be 12.5 per cent.

The recent cuts in repo rate by RBI have not led to a consequential reduction in the lending rate as reported by 55 per cent of the respondents, it said.