Average Interest Rate Paid By Manufacturers In January-March Rises To 9.38%: FICCI Survey

The average interest rate per annum paid by  manufacturers has risen to 9.38 per cent in January-March as against 8.37 per cent in the previous quarter, with a majority of firms reporting that their cost of borrowing has risen, said a FICCI survey released on Monday. The survey assessed the sentiments of manufacturers for Q4 (January-March) for 11 major sectors and responses were drawn from 400 manufacturing units across large and SME segments with a combined annual turnover of over Rs 10 lakh crore.

It revealed that after experiencing revival of Indian economy in the FY 2021-22, momentum of growth has continued for the subsequent quarters of FY 2022-23 with some temporary effect of global slowdown on Indian manufacturing. There are signs that the cost pressure witnessed in the last many months seems to be softening a bit for the sector, notes the latest FICCI Manufacturing Survey.

Moreover, hiring outlook though positive, remains below potential as only 32 per cent of the respondents were looking at hiring additional workforce in the next three months. Average interest rate paid by the manufacturers has increased to 9.38 per cent per annum as against 8.37 per cent per annum during last quarter and the highest rate at which loan has been raised is 15 per cent per annum.

"Over 71 per cent of the respondents have reported that increase in repo rates in the last few months has led to a consequential increase in the lending rate by their banks, thereby increasing their cost of borrowing," FICCI stated on the survey. The existing average capacity utilization in manufacturing is around 75 per cent which reflects a sustained economic activity in the sector, as against70 per cent capacity utilization reported for previous survey.

The future investment outlook has also improved as compared to previous quarter as over 47 per cent respondents reported plans for investments and expansions in the coming six months. This is also an improvement over the previous survey where only 40 per cent reported plans for investments in the next six months. However, global economic uncertainty caused by the Russia-Ukraine war and increasing cases of various mutations of COVID virus in other countries continue added to volatilities in supply chain and demand.

"Increased cost of finance, cumbersome regulations and clearances, high logistics cost due to high fuel prices, low global demand, high volume of cheap imports into India, shortage of skilled labour, highly volatile prices of certain metals etc. and other supply chain disruptions are some of the major constraints which are affecting expansion plans of the respondents," FICCI said.

The eleven major sectors covered by the survey include Automotive & Auto Components, Capital Goods, Cement, Chemicals and Pharmaceuticals, Electronics, Machine Tools, Metal & Metal Products, Paper Products, Petrochemicals & Fertilizers, Textiles, Apparels & Technical Textiles, Textile Machinery and Miscellaneous.