A quarterly survey published by the Federation of Indian Chambers of Commerce and Industry (FICCI) points out that food processing firms are facing constraints in production due to rising prices of raw materials, labour related issues, shortage of skilled labour and lower demand. And this could lead to a slowdown in the food manufacturing sector. Further, according to the quarterly outlook for the sector wherein there were 21 food sector-specific respondents, the investment and expansion outlook was predicted ‘bleak.’
According to most of the respondents, growth in manufacturing sector is likely to further slow down in the coming months. Following suggestions were made by respondents from the sector on policy front to revive growth - Undertake labour reforms with easier ‘hire and fire’ policy; introduce simpler credit facility with lower interest rates; improve infrastructure needs; go in for simplification of regulations; and do away with frequent audits.
While slowdown in terms of monetary value is not disclosed, FICCI in a reply to FnB News revealed that some of the respondents reported fall in production (during the current quarter) while some reported an increment in the range of 8-10% over the same period. It should be noted that the respondents reporting higher production level largely cater to the ‘ready-to-cook’ product segments.
The survey stated that respondents in food sector provided a divided opinion when asked for their production levels in the April – June quarter 2016-17 vis-a-vis the same quarter last year with half of the respondents reporting higher levels and the other half reporting similar levels. Almost all the respondents reported flat order books for the same period. A similar situation seems to be prevailing on exports front as most of the respondents reported flat exports over the same period.
Further, the industry currently utilises 70% of its installed capacity and is not in favour of expanding the same. Almost half of the participants indicated their current inventories to be at higher levels than their average inventory levels while others reported the same to be at levels similar to their average levels. Most of the respondents in this sector are not planning to hire new workforce in next three months.
However, some industry experts offer a different view stating that there could not be any generic view on the growth of the sector and the sector was moving ahead with double-digit growth. “As far as the prices of the raw material were concerned, they affect only when there was serious fluctuation in the commodity prices. Otherwise I don’t see any serious trouble for the sector as of now,” said Sagar Kurade, president, AIFPA.
FICCI’s latest quarterly survey gauges the expectations of manufacturers for Q-1 (April-June 2016-17) for 13 major sectors, namely, textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather & footwear, machine tools, food, tyre, paper and textiles machinery. Responses have been drawn from 308 manufacturing units from both large and SME segments with a combined annual turnover of over Rs four lakh crore.
