Overall business sentiments in Indian manufacturing sector declined – RBI Survey

Overall business sentiments in Indian manufacturing sector declined as per RBI Industrial Outlook Survey of the Manufacturing Sector for Q1:2017-18

RBI Industrial Outlook Survey of the Manufacturing Sector for Q1:2017-18

Today, the Reserve Bank released results of the 78th round of the Industrial Outlook Survey (IOS) conducted in April-June 2017. The Survey captures qualitative assessments of the business situation by companies in the Indian manufacturing sector for Q1:2017-18 and their expectations for Q2:2017-18¹. Responses were received from 1250 companies in this round of the survey.

Highlights of the Survey are as under:

1. Assessment for Q1: 2017-18

1.1 Respondents were less optimistic about demand conditions in Q1:2017-18 than a quarter ago as reflected in all the major parameters – production; order books; capacity utilisation; exports; and, employment.

1.2 Optimism on the overall financial situation rose marginally, mainly due to better availability of finance from banks and other sources.

1.3 Respondents continued to face raw material cost pressure which could not be passed on in view of weak pricing power.

1.4 Input costs and higher salary payments squeezed profit margins in the sector.

1.5 Overall, business sentiments in the Indian manufacturing sector, as reflected in the Business Expectations Index (BEI), declined from 106.0 in Q4:2016-17 to 105.4 in Q1:2017-18.

2. Expectations for Q2: 2017-18

2.1 The outlook for demand parameters for Q2:2017-18 was not impacted and remained similar to that observed in the last quarter. However, the overall financial situation was perceived to be slightly less optimistic in Q2:2017-18 due to the sector having inadequate pricing power.

2.2 The BEI for Q2:2017-18 was lower at 113.3 than 114.2 in the previous quarter.