Manufacturing dips to one-third of pre-COVID in Q1; firms still optimistic of reducing imports: FICCI

Among the worst sectors are automotive, leather and footwear, electronics and electricals and textiles machinery.

With coronavirus lockdown in place, manufacturing activities have nosedived in the country to nearly one-third of the pre-COVID level. However, manufacturing companies are still looking to reduce imports in certain sectors after Prime Minister Narendra Modi’s call for Make in India. “Latest quarterly survey on manufacturing reveals a dismal status for Q1 (April-June 2020-21) as compared to the previous few quarters of 2019,” a FICCI report said on Monday, adding that manufacturers are looking to reduce dependency in areas like automotive, textiles machinery and leather/footwear firms are looking at alternative sources of inputs/raw materials. On an average, companies are operating between 28 to 63% of their pre-COVID capacities with workforce deployment ranging from 33 to 57%.

The government had imposed a nationwide lockdown on 24th March 2020 to keep coronavirus in check. The same had a detrimental effect on the manufacturing sector when compared to Q4 of 2019-20. “The proportion of respondents reporting higher output during April-June 2020 has fallen to just 10% as compared to Q4 of 2019-20 (15%),” the report said. In fact, a whopping 90% of respondents also said that they expect low or same production in Q1 2020-21. Overall, there has been a capacity utilization decline in manufacturing to 61.5% in Q4 2019-20 as compared to 76% in Q3FY20. 

“The future investment outlook looks subdued as only 22% respondents reported plans for capacity additions for the next six months as compared to 28% in previous quarter,” the report said. Since lockdown, prices have gone up for raw material, the financing cost has risen, the issue of demand uncertainty persists along with the shortage of skilled labor and working capital. Moreover, logistics costs continue to soar. These are some of the major constraints for the expansion plans of companies.

Meanwhile, among the worst sectors are automotive, leather and footwear, electronics and electricals & textiles machinery.