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Manufacturing industry seeks growth revival

Posted on Nov 25, 08:27AM | IBNS

With economic activity in Indian manufacturing sector is picking up slowly in view of the rising production levels together with upward spiraling domestic and export orders, the manufacturing industry is gung-ho about improved performance and better growth prospects in the financial year 2012-13, according to a just concluded survey by apex industry body ASSOCHAM.

"Due to a slump in the industrial activity, the manufacturing sector in India has of late been grappling with dwindling demand in the domestic and export markets and high cost of credit," said Rajkumar Dhoot, president of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) while releasing the 'ASSOCHAM Manufacturing Survey-2012'.

"There is an urgent need to develop a manufacturing eco-system and enhance the competitiveness of domestic manufacturing industry which is crucial for achieving the planned objective of sustainable and inclusive growth," said the ASSOCHAM chief.

"There is a need to formulate a clear policy to tackle the key structural issues impending the growth of manufacturing sector."

The ASSOCHAM Research Bureau interacted with about 156 companies between July-September to ascertain the viewpoint of the manufacturing industry on the pessimism surrounding the Indian economy and the future prospects.

With an increase in domestic demand orders during the course of last six months, majority of the manufacturing community respondents said their current domestic sales and production levels have surged significantly as against the position six months ago.

About half of the respondents said that production would be higher as the output growth of the manufacturing industry would improve considerably during the course of next six months on the back of anticipation of increased overall demand.

A whopping 92 per cent of the respondents said their overall costs of production would surge significantly due to rise in raw material prices coupled with high expenditure incurred on fuel, electricity and labour during the last six months.

Manufacturers are passing this cost burden on domestic consumer as about 66 per cent of respondents said the current domestic selling price has increased as against the prices prevalent about six months back and the selling price would further increase in the next six months.

While about 35 per cent said there is no change in the selling price in the export markets due to a gloomy scenario in these markets which does not give them the same leeway.

Besides, about 31 per cent of the respondents said the current level of interest rates is a major concern for the manufacturing industry.

Besides, the shortage of skilled and semi-skilled labour, rising prices of imported raw material and poor infrastructure are other critical factors hampering the growth of the sector.

In its survey, ASSOCHAM has highlighted certain essential measures to perk up the manufacturing sector in India - ensuring land availability for setting up manufacturing industries, securing smooth supply of raw material, providing top quality physical and administrative infrastructure.