The quarterly survey of the manufacturing sector found the average rate of operations between 28-63%, with the auto industry showing the worst performance and medical devices sector being the least impacted.
Capacity utilisation had already dropped to 61.5% in the fourth quarter of the last fiscal, the survey said, in comparison to the 76% reported during the quarter ending December 2019.
From electronics to textiles, industry-wise quarterly trends showed capacity utilisation during Q1this fiscal dropped across the manufacturing sector over the final quarter of FY20, except for medical devices and metals.
Most forecasts project a deep contraction in quarter one growth. While SBI Research expected a 45% contraction, ICRA saw the quarter contracting 25%.
Further, localised lockdowns extending till the end of July, announced by Tamil Nadu, Maharashtra, Uttar Pradesh and Bihar to name a few, have dampened recovery prospects and prolonged revival timelines.
Of 300 respondents covering large, small and medium enterprises, just 10% reported higher production in Q1of this fiscal, compared to the previous low of 15% in Q4 of FY20. Hiring looked bleak as 85% of respondents had no plans to hire additional workers for the next three months, the survey said.
However, the sector still faced a labour shortage with most firms working with 33-57% of their workforce. While data from the Centre for Monitoring Indian Economy (CMIE) showed receding unemployment, down to 11% in June from a high of 23.5% in May, these levels were still higher than the pre-pandemic period.