Manufacturing sector to be impacted in FY23 as exports take a hit: Report



The Indian manufacturing sector, which received a fillip in FY22 due to export growth, is likely to be hit by a slump in foreign trade activity in FY23, a report said on Thursday.


An analysis of industrial output and merchandise by India Ratings and Research suggested that the “exuberance” witnessed in merchandise in FY22 helped the manufacturing segments.

“Surge in merchandise helped the in FY22, but was not broad-based and may not sustain in FY23,” the rating agency said.


The exports trend of FY22 may not sustain in FY23 due to the adverse impact of the Russian invasion of Ukraine, leading to recessionary concerns in the advanced economies, stringent COVID-19 control measures in China impacting production in various sub-sectors in India, and continued disruptions in global supply chain/trading sanctions imposed on Russia, it added.


The note said India’s average annual merchandise exports during FY16-FY20 were USD 297.02 billion, having peaked at USD 330.08 billion in FY19. The same jumped to the highest-ever USD 421.89 billion in FY22.


“Since the pickup in merchandise exports has primarily been driven by the higher exports of manufactured goods, its spillover effect was expected to be visible in the higher capacity utilisation and an improvement in the industrial growth numbers in FY22,” it said.


The agency said it mapped the merchandise trade data to the two-digit Index of Industrial Production, and disaggregated goods export data with the IIP.


“Even on the FY20 base with the exception of a few, most manufacturing segments recorded double-digit export volume growth. In fact, the export volume growth pattern across the different manufacturing segments was broadly similar both on the FY21 and FY20 base,” Paras Jasrai, an analyst at the agency, said.


The agency said basic metals, textiles, pharmaceuticals and food products witnessed a robust rebound in export volumes in FY22 when compared to FY20 volume levels, suggesting that the production in these segments benefited from the buoyant export demand.


Textiles witnessed a sharp recovery both in exports and import volumes along with production, it said, adding that all these sectors have a share of 26.4 per cent in the overall industrial sector and formed 24.1 per cent of the merchandise exports in FY22.


On the other hand, the sectors which not only witnessed low growth in production levels but also low-to-moderate export volume growth in FY22 were railways locomotives, ships and aircraft, wearing apparel and leather products, among others.


Labour-intensive sectors such as wearing apparel and leather products have benefited from neither domestic nor external demand, it said, adding this does not augur well from the perspective of employment generation in the country.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor





Source link

Leave a Comment