New Delhi, Feb 6 There has been an uptick in industrial activities, but the manufacturing capacity utilisation of companies remain low, suggesting working capital issues for producers and tepid demand from consumers.
The capacity utilisation (CU) in the manufacturing sector, measured by the Reserve Bank's order books, inventory and capacity utilisation survey (OBICUS), fell to 69.1 per cent in Q2 from 73.6 per cent in the previous quarter. Seasonally adjusted capacity utilisation also eased to 70.3 per cent from 73.4 per cent.
"The Reserve Bank's industrial outlook survey points to weak demand conditions facing the manufacturing sector in Q3 of 2019-20," the RBI said in a press statement.
The Reserve Bank's business expectations index, however, suggests an improvement in Q4.
"This is corroborated by the manufacturing purchasing managers' index (PMI) for January 2020 which picked up sharply to 55.3 from 51.2 in November 2019 on the back of increased output and new orders," the central bank said in its bi-monthly monetary policy statement.
Industrial activity, measured by the index of industrial production (IIP), improved in November after contracting in the previous three months. The output of core industries returned to positive territory in December after four months of contraction, buoyed by five out of eight of its constituents coal, refinery products, fertilisers, steel and cement.
Nirupama Soundararajan, Senior Fellow and Head of Research at think-tank 'Pahle India Foundation' said that the industrial activity may go up due to optimism.
"From a manufacturing capacity point of view, most of the companies are facing underutilisation of capacity because of working capital requirements. The credit is not coming at the right time. There is less demand because of low buying capacity of consumers," she said.
( With inputs from IANS )