India's manufacturing sector is expected to expand 11-12 per cent in the April-June quarter, lower than 15 per cent expected in January-March, due to sharp increases in raw material prices and insufficient power, according to a survey.
The survey by industry lobby FICCI (Federation of Indian Chambers of Commerce and Industry) said chemical and allied products, which have a significant share in the overall manufacturing sector, are likely to pull down the growth rate.
"Around 74 per cent respondents expect their production levels to be higher in quarter April-June 2010 compared to April-June 2009... the growth in April-June 2010 is likely to slow down compared to January-March 2010," it said.
The sectors which would contribute significantly to the growth are automotive, FMCG, electronics & consumer durables, metal & metal products, forging, textiles, machinery, tyre and ship building.
While order books for a majority of companies are likely to increase during the period due to rising domestic and export demand in some sectors, few sectors like chemicals, cement and machine tools are reported to have insufficient orders.
The hardening of raw material prices in sectors like cement, textiles, leather, metal and tyre, unavailability of sufficient power, current labour laws, uncertainty in economic environment and inadequate export demand were found to be the major constraints for the growth of the sector, the survey said.
The survey, based on responses from 468 manufacturing firms, suggested that the investments in manufacturing needs to be incentivised.
As per the survey, sectors like FMCG, consumer durables, tyres, automotive and cement are likely to expand, with many of them planning to hire additional workforce in the next three months.
However, textiles, electronics, metals, machinery and cement may not add workforce in a significant manner, it added.