The Hindu Business Line : Industries more optimistic on Q2 show: Survey

New Delhi, July 21 The domestic manufacturing sector is likely to witness a strong growth in July-September 2009 compared with the same quarter last year, according to a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI).

Eight of the 10 sectors surveyed reported hopes of high growth in 2009 Q2.

Sectors such as technical textiles, metals, machinery, automotive, chemicals, leather and electronics are expecting a higher growth rate in Q2 and projecting an increase in production as compared with Q2 in 2008.

Despite the optimism, concerns continue to remain over high interest rates and a fall in exports.

The FICCI survey pointed out that credit is still provided at interest rates as high as 16 per cent making the Indian manufacturers totally uncompetitive globally. In the case of sectors such as textiles, metals, machinery and chemicals, firms reported that they were still borrowing at rates between 14 and 16 per cent.

Also banks are reluctant to lend to small and medium enterprise manufacturers as many of them had losses in the pervious year. Firms also complained that banks were asking for a higher value of collateral security than the sanctioned limit.

Exports paint a mixed picture with 5 out of the 10 sectors in the survey reporting that exports in Q2 are expected to be less than in the same period last year. While textiles, metal, tyres, chemical and others expect a drop, technical textiles, machinery, automotive, leather and electronics sectors expect a growth. The survey also makes certain suggestions to push the manufacturing sector’s growth to a higher trajectory. Suggestions include increasing drawback rates for apparels and textiles from 8 to 14 per cent, withdrawal of increase in excise duty from 4 to 8 per cent on man made fibres and increasing excise duty exemption limit to Rs 5 crore for SMEs.