'Manufacturing sector to post growth in Q2'

The manufacturing sector, which accounts for around 80 per cent of the industrial production, is likely to see a reasonable growth in the second quarter of the fiscal even as high interest rates and declining exports would continue to impact it, a survey said.

Eight out of the 10 segments of the sector would report not only positive but also high growth for the July-September 2009 period over the same quarter last year, the survey by industry body FICCI said.

However, “...the growth in our manufacturing sector would continue to be restrained by exports in July-September 2009,” the survey based on responses from 250 firms in 10 sectors, including textiles, metal, chemicals, tyre and electronics, said.

Respondents from five sectors — textiles, metal and metal products, tyres, chemicals and miscellaneous — expect their exports would continue to fall in the second quarter.

FICCI further said that besides exports another factor that would impact growth of the manufacturing sector is the rate of interest and difficulties in procuring credit by small and medium enterprises.

It said that credit is still provided at interest rates as high as 16 per cent making the Indian manufacturers uncompetitive globally. “Banks are reluctant to lend to Small and Medium Enterprise (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 FICCI survey said.

The survey said the sectors that are expected to witness high growth are metal and metal products, machinery and equipment, automotive, chemicals, leather, electronics and miscellaneous industry.