NEW DELHI - Despite high interest cost and falling exports, India’s manufacturing sector will recover in the second quarter this fiscal, says a report by the Federation of Indian Chambers of Commerce and Industry (FICCI).

“Indian manufacturing sector is likely to witness more than a moderate growth with eight out of the 10 sectors surveyed reporting not only positive but also high growth for July-September 2009 vis-a-vis same quarter last year,” said the FICCI report.

“The eight sectors that are expected to witness high growth are metal and metal products, machinery and equipment, automotive, chemicals, leather, electronics and miscellaneous industry,” it added.

The FICCI survey was carried out for the first two quarters this fiscal based on the responses received from over 250 firms.

At the same time, FICCI said, credit rate was as high as 16 percent, rendering Indian manufacturers uncompetitive globally.

“Banks are reluctant to lend to SME (small and medium enterprises) as many of them had earned losses in the previous year and hence banks are insisting on credit ratings for these borrowers,” FICCI said.

According to the chamber, banks are now asking for a higher value of collateral security than the sanctioned limit.

It said the textiles sector continued to be a “source of worry” with most respondents saying the sectoral production in the second quarter this fiscal would be lower than in the corresponding period last year.

“However, the fall in production seems to have bottomed-out in textiles sector in July-September 2009,:” FICCI said.

On the exports front, the FICCI Survey said five out of the 10 manufacturing segments would witness a fall in exports in July-September, as compared to the corresponding quarter last year.

The five sectors are textiles, metals, tyres, chemicals and miscellaneous industry.

However, it added, exports in the July-September quarter is slightly better than that in April-June, when eight out of 10 segments reported a fall in exports.