No improvement in capacity utilization
For the last four years, there has been no improvement in capacity utilization in the manufacturing sector
The Reserve Bank of India’s Order Books, Inventories and Capacity Utilisation Survey, which provides a snapshot of demand conditions in the manufacturing sector, shows that capacity utilization was at 71.2% for the quarter ended 30 June. As the chart shows, that’s a bit lower than what it was in the year-ago quarter and well below capacity utilization in the June 2015 quarter. Just to rub it in, it’s even lower than in the June 2014 and June 2013 quarters. (We’re taking comparable quarters here because of seasonal variations).
In short, for the last four years, there has been no improvement in capacity utilization in the manufacturing sector. That doesn’t augur well for the revival of investment demand any time soon. It also raises the question whether domestic demand is being satisfied by increased imports.
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