New Delhi: After hitting a 44-quarter, 11-year high of 76.8% in the fourth quarter of last fiscal, capacity utilization rate in the Indian manufacturing sector, RBI data (Order Books, Inventory and Capacity Utilization Survey) shows. The corporate sector has grown by 74% in Q1FY25.
Also, the companies’ inventory-to-sales ratio increased to 67.4% in the April-June quarter this fiscal year from 65.4% in the previous quarter, indicating continued weakness in consumer demand.
The inventory-to-sales ratio reached 113.8% in the three months to June 2020 during Corona, having been in the range of 49% to 55% from FY08 to FY19. It has remained above 60% for 10 consecutive quarters through June this year, indicating that companies will have to adjust their production and new investments to ease inventories with dealers.
Both finished goods inventory-to-sales and raw materials-inventory-to-sales increased by 26.1% and 24.8% respectively in the quarter ended June this year. While the inventory ratio increased, the finished goods ratio was slightly lower. So it is not weak demand but companies with excess inventory of raw materials and work in progress. We need to see how demand evolves in this quarter. RBI data showed that the capacity utilization rate in the manufacturing sector fell to 74%, the lowest seen in the three months to September last year, ahead of the general elections.
In fact, the capacity utilization rate has been consistently above 70% since Q3FY20 after reaching a low of 47% in Q1FY20. It reached 83.2% in the fourth quarter of FY2011.
Comments are closed.