Manufacturing Sector To Be Impacted In FY23 Amid Hit In Exports: Report

Amid the sharp growth in the Indian manufacturing sector in FY22 due to exports, it is expected to be hit by a slump in foreign trade activity in FY23, according to a report.

India Ratings and Research’s (Ind-Ra) analysis of the industrial output and merchandise exports data suggests that the exuberance witnessed in merchandise exports in FY22 did provide a helping hand to a number of manufacturing segments amid the weak domestic demand. 

"But it was not broad-based and confined to a handful of sectors," the rating agency said.

The report mentioned that the exports trend of FY22 might not sustain in FY23 due to the adverse impact of the Russia-Ukraine war leading to recessionary concerns in the advanced economies, stringent strategy to control Covid-19 in China has implications for production in various sub-sectors in India and continued disruptions in global supply chain/trading sanctions imposed on Russia.

India’s average annual merchandise exports during FY16-FY20 was USD 297.02 billion, having peaked at USD 330.08 billion in FY19. However, it jumped to the highest-ever USD 421.89 billion in FY22, it said. 

"Since the pickup in merchandise exports has primarily been driven by the higher exports of manufactured goods, its spill-over effect was expected to be visible in the higher capacity utilisation and an improvement in the industrial growth numbers in FY22," the report added.