The employment scenario that worsened amid the pandemic is unlikely to see a revival any time soon, as a survey by FICCI shows that most of the companies in the manufacturing sector, a major employer in the country, are unlikely to hire more workforce in the next three months.
The FICCI's Quarterly Survey On Indian Manufacturing Sector' for the April-June quarter showed that around 85% of the respondents from the sector are unlikely to hire additional workforce in the next three months compared with 78% in the fourth quarter of 2019-20.
The survey painted a very grim situation in the sector as only 10% of the respondents in the manufacturing sector reported an increase in production in the first quarter of fiscal 2020-21.
"The percentage of respondents reporting higher production in the first quarter of 2020-21 has fallen significantly vis-a-vis the Q4 of 2019-20. The proportion of respondents reporting higher output during April-June 2020 fell to just 10% compared with Q4 of 2019-20 (15%)," said the FICCI's latest quarterly survey, painting a dismal scenario compared with previous few quarters of 2019.
The survey elicited responses from over 300 manufacturing units in both large and SME segments with a combined annual turnover of over Rs 2.5 lakh crore.
Respondents expecting low or same production totalled 90% in Q1 2020-21, which was 85% in Q4 of 2019-20.
The overall capacity utilisation in manufacturing has witnessed a decline to 61.5% in Q4 2019-20 compared with 76% in Q3 2019-20, as per the survey.
The future investment outlook looks subdued as only 22% respondents reported plans for capacity additions in the next six months compared with 28% in the previous quarter.
High raw material prices, high cost of finance, uncertainty in demand, shortage of skilled labour and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown to contain spread of coronavirus are some of the major constraints affecting the expansion plans of the respondents.
The average capacity utilisation for Q4 2019-20 has decreased for all sectors, except medical devices as well as metals and metal products, wherein average capacity utilisation has remained the same in Q4 of 2019-20 compared to Q3 2019-20.
Further, the FICCI survey also showed that in certain areas like automotive, textiles machinery and leather and footwear firms are looking at alternative sources of inputs and raw material.
In terms of back-to-business status, the survey noted that on an average, firms are operating (depending on sectors) between 28% to 63% of their capacities with a workforce deployment ranging from 33% to 57%.
This assessment is also reflective in order books as 85% of the respondents in April-June 2020-21 expected lesser orders as against 54% in January-March 2019.