By Jeeta Bandopadhyay

The domestic manufacturing industry, which comprises of several SMEs, is already experiencing a slowdown in business sentiment, reveals a recent survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI).

According to the FICCI survey, more than 74% of the respondents feel that there is a strong possibility for the sector to register moderate growth in the second quarter of 2011-12, as against the growth in the corresponding period in FY11. The survey included 324 manufacturing units.

The survey findings reveal low demand, decline in investments, lower capacity utilisation and significant fall in order books in the second quarter as reasons for the slowdown in business sentiment. Besides, the sector has also shown a declining trend in employment generation in recent times, the survey added.

Industry associations stated that the manufacturing sector’s growth may decelerate in the coming quarters in the backdrop of increasing interest rates and rising input costs.

Rajiv Chawla, president of Faridabad Small Industries Association (FSIA) seconded FICCI’s study saying, “The sector’s growth has moderated and may taper down further over the coming months due to rising fuel costs, raw material costs and high rate of interest. The current situation is not at all good for domestic small manufacturers across various industry verticals.” The government should make India a manufacturing friendly nation, incentivise production, reintroduce investment allowance and increase depreciation rates to increase production capacity, proposed Mr Chawla.

CII echoes similar thoughts
The Confederation of Indian Industry (CII) echoed FICCI’s opinion. In a separate survey, CII found out that a large number of companies engaged in various manufacturing activities witnessed slowdown in growth during the first half of 2011-12.

CII director general Chandrajit Banerjee said in a statement that the government needs to accelerate the reform agenda to get the manufacturing industry back on track. One of the right steps in this direction would be to unveil the National Manufacturing Policy at the earliest as the policy is expected to create 100 million jobs in the next decade.

Only 10.5% companies that participated in the CII survey are expected to witness a rise in production by more than 20% in the first half of FY12. The survey covered 3,500 companies associated with manufacturing business.