Capacity Utilisation in India's Manufacturing Sector

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Source: CMIE Economic Outlook, 1 Finance Research

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What is the significance of Capacity Utilisation data?

Trends in capacity utilisation helps in assessing whether the economy is operating under pressure (near or at full capacity) or has room to grow without triggering inflation.
The data is used to analyse business cycles and predict future economic activity, including investment and employment trends in the manufacturing sector. Trends in capacity utilisation also influence monetary policy decisions and investment strategies, both in the private and public sectors.
For businesses, this data is a key indicator to understand the overall efficiency of the industrial sector for making informed decisions on investments, technology upgrades, expansions, or contractions in production, and to manage the workforce.

High capacity utilisation often suggests a high demand for products, indicating a robust economy, whereas low capacity utilisation can imply a downturn indicating weak demand or overcapacity.
Capacity utilisation data can be correlated with other indicators, such as industrial production to analyse the industrial outlook.

Capacity Utilisation data reflects the extent to which an industry is using its installed productive capacity.
Expressed as a percentage, this data indicates how much of the total manufacturing capability is being utilised at a given time.