THE ongoing manufacturing sector slowdown seems to have hit the capacity utilisation of smaller companies to a much greater degree than that of bigger firms, a disturbing fact considering that smaller firms account for much higher levels of employment in the country on a cumulative basis.
The RBIís ĎOrder Books, Inventories and Capacity Utilisation Surveyí (OBICUS) conducted during October 2012 to September 2013, shows that while the capacity utilisation (CU) levels in the Indian manufacturing industry moved in a lower trajectory since 2012-13, a disaggregated size-wise analysis of data indicates that CU levels continued to be higher for larger companies in all the quarters.
Taking the top 10 companies from each industry-group (based on value of production in the latest survey round), it was seen that the CU level for these group was higher by 25-30 percentage points than CU level of remaining companies. The OBICUS is based on a sample of 2,500 manufacturing companies.
The findings of the latest OBICUS show that in the first three quarters between October 2012 and June 2013, all the parameters ó new orders growth, level of capacity utilisation and finished goods inventory to sales ratio ó reflected a weaker condition as compared to the corresponding position a year ago.
In the following July-September 2013 quarter, some turnaround was observed in all the above parameters. This was corroborated in the improved sales position of the private manufacturing sector during the quarter.
During Q3FY13 to Q1FY14, CU at the aggregate level was found to be lower when compared with the position in the corresponding quarter a year ago.
Reflecting seasonal trend, though, CU recorded a high in Q4FY13 and a low in Q1FY14. CU picked up in the second quarter of FY14 and at 73.7 per cent, it was marginally higher than the level observed in the same quarter of the previous year.
The movements in CU, according to the survey, remained broadly in line with the movements in the de-trended IIP for manufacturing sector.
Apart from the CU, the average value of new orders of sample companies was lower in Q3FY13 as compared with the position in Q3FY12 but was marginally higher than that in Q2FY13.
For the next two quarters, new orders contracted both on year-on-year (y-o-y) and quarter-on-quarter (q-o-q) basis. However, there was a turnaround in Q2FY14 when new orders grew both on y-o-y and q-o-q basis.
The survey shows that finished goods inventory to sales