Growth of Indian Paper Industry, Industrial Survey on Indian Paper Mills, Survey Report of Year 2017-2018

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Read the details of exclusive survey conducted by FICCI on Indian Paper Mills. Indian Paper Industry has achieved highest Capacity Utilization in Year 2017-2018.


Introduction & Quarterly Outlook for the Manufacturing Sector

Production and Demand
FICCI’s latest quarterly survey assessed the expectations of manufacturers for Q-4 (January-March 2017-18) for twelve major sectors namely automotive, capital goods, cement and ceramics, chemicals and pharmaceuticals, electronics & electricals, food products, leather and footwear, machine tools, metal & metal products, paper products, textiles and textiles machinery. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over Rs.3 lac crore.

    • - FICCI’s latest quarterly survey on Manufacturing portrays positive outlook for the manufacturing sector in Q-4 (January-March 2017-18) as the percentage of respondents reporting higher production in fourth quarter has increased vis-à-vis previous quarter of 2017-18.
    • - The proportion of respondents reporting higher output growth during the Q-4 2017-18 has increased significantly to 55% from 47% in Q-3. It is worth mentioning that Q-4 has witnessed the highest percentage of respondents (55%) expecting higher production since Q-2 of 2016-17. The percentage of respondents reporting low production has also come down to 11% in fourth quarter from 15% in Q-3 of 2017-18.
    • - In terms of order books, 51% of the respondents in Q-4 (January-March, 2017-18) are expecting higher number of orders as against 42% of Q3 2017-18 which again is a sign of revival.

    Figure: Respondents Expecting Higher Production in the Quarter
     vis-à-vis Respective Last Year’s Quarter


    Capacity Addition & Utilization

      • - However, overall capacity utilization in manufacturing remains low. The average capacity utilization for the manufacturing sector is about 77% for Q-3 2017-18 as reported in the survey which is similar to that of Q-2 2017-18.
      • - The future investment outlook remains pessimistic as 64% respondents in Q-3 2017-18 reported that they are not planning any capacity additions for the next six months. High raw material prices, low domestic and export demand, exchange rate appreciation, increasing imports, excess capacities and shortage of working capital finance are some of the major constraints which are affecting expansion plans of the respondents.
      • - In some sectors like electronics & electricals, automotive, capital goods, textiles, textiles machinery, leather & footwear, metal & metal products and machine tools, average capacity utilization has either increased or remained almost same in Q-3 of 2017-18.

      Inventories

      • Inventory scenario has not changed much in 2017-18. In third quarter, 90% of the respondents have reported that they have maintained either more or same level of inventory which is similar to that of previous quarters.

      Exports

      • - The outlook for exports seems marginally positive as 47% of the participants are expecting a rise in the exports for Q-4 and 34% are expecting the exports to continue on same path as that of same quarter last year.
      • - Rupee appreciation has also affected exports during Q-3 2017-18 as 80% of the respondents reported that the exports were affected by upto 5% due to rupee appreciation.

      Hiring

      • Hiring outlook for the sector remains subdued though better than last quarters, in near future as 70% of the respondents mentioned that they are not likely to hire additional workforce in next three months. This proportion has declined as compared to the previous quarter where 85% of the respondents were not in favour of hiring additional workforce.

      Interest Rate

      • Average interest rate paid by the manufacturers has remained same as that of previous quarter standing at 11% p.a. but the highest rate continues to be as high as 16% (increased by 1% over previous quarter).

      Sectoral Growth

        • Based on expectations in different sectors, it is noted that high growth is expected in Automotive and Capital Goods for Q-4 2017-18. Moderate growth is expected in Cement and Ceramics, Chemicals & Pharmaceuticals, Leather & Footwear, Paper, Machine Tools, Metals and Metal Products, Electronics & Electricals and Food Products in Q-4 2017-18 whereas low growth is expected in Textile Machinery and Textiles sector.

        Production Cost

        • The cost of production as a percentage of sales for manufacturers in the survey has risen significantly for 62% respondents in Q-3 2017-18. This is primarily due to increase in cost of raw materials, increased wages, power cost and higher GST rates on certain products.

        Paper Products

        • - Paper producers expect an increase in production level in Q-4 2017-18 as compared to the same quarter last year. The same was reflected in order books as well.
        • - Industry is reportedly operating at an average capacity of 80% which is similar to that of last year. Owing to excess capacity, most of the respondents reported that they are not planning to increase their capacity in next 6 months.
        • - On the exports front, all respondents expect a rise in exports during the Q-4 2017-18 as compared to corresponding period of last year.
        • - The cost of production has increased for all the participants as a result of higher cost of chemical and petroleum products, rising international prices of pulp and high manpower cost.
        • - All the survey participants reported that they are maintaining low levels of inventory.
        • - Majority of the respondents are not planning any increase in manpower in next 3 months.
        • - Most of the industry representatives believe that the growth rate of manufacturing sector will remain at same level in coming months. Industry has recommended the following for faster growth of the sector:
        • - Need for increased investment in infrastructure development.
        • - Need for more support to encourage exports.
        • - The respondents highlighted deficiency of raw materials, competition faced from imports and availability of skilled labour as other areas of concern for the sector. Thanks.

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