High manufacturing growth expected in July-September quarter

The manufacturing sector in the country is expected to show positive growth in the second quarter of the current fiscal (July-September 2009-10), a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) showed.

The FICCI survey showed that eight out of the 10 segments of the manufacturing sector would report high growth in the July-September 2009 quarter compared with the growth in the same quarter of the previous year.

Industry segments, including metal and metal products, machinery and equipment, automotive, chemicals, leather, electronics and miscellaneous industries are expected to post high growth.

Manufacturing growth would, however, be constrained by falling exports, mainly in the textiles, metals, chemicals, tyre and electronics segments, the survey based on responses from 250 firms showed.

Manufacturing sector, which accounts for around 80 per cent of the country's industrial production, would, however, be impacted by high interest rates and the difficulties associated with contracting credit, according to the survey.

Industries like textiles, metal and metal products, tyres and chemicals as also miscellaneous industries expect their exports to continue falling in the second quarter as well.

With interest rates on commercial loans ruling above 16 per cent, the manufacturing sector in the country will find it difficult to effectively compete globally, the survey noted.

"Banks are reluctant to lend to SME manufacturers as many of them had earned losses in the previous year and hence banks are insisting on credit ratings for these borrowers," the survey stated.