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Date : Feb 07, 2019
Industrial Outlook Survey of the Manufacturing Sector for Q3:2018-19 (Revised)

Today, the Reserve Bank released the results of the 84th round of the Industrial Outlook Survey (IOS) conducted in October-December 2018. The Survey captures qualitative assessments of the business environment by companies in India’s manufacturing sector for Q3:2018-19 and their expectations for Q4:2018-191. Responses were received from 1,267 companies in this round of the survey.

Highlights:

• Demand conditions in Q3:2018-19 presented a mixed picture - the assessment of production and order books showed signs of moderations relative to Q2:2018-19; responses in respect of capacity utilisation remained at the same level as in the previous quarter; in respect of exports, respondents expressed rising optimism.

• Sentiments regarding the overall financial situation ebbed slightly, reflecting concerns on the availability of finance from both internal accruals and external sources.

• While input cost pressures (on raw materials and salary expenses) eased, lack of pricing power shrank the profit margin relative to the previous round of the survey.

• Overall business sentiment in the Indian manufacturing sector moderated, as reflected in the Business Assessment Index (BAI)2 which moved from 110.0 in Q2:2018-19 to 107.1 in Q3:2018-19.

• As regards expectations for Q4: 2018-19, respondents were optimistic on the outlook about demand conditions.

• Sentiment on the overall financial situation also improved on expectations of easier availability of finance.

• While optimism on the outlook for selling prices moderated, profit margins are expected to improve with reduced input costs (finance, raw materials and salary outgo).

• The Business Expectations Index (BEI) improved from 115.0 in Q3:2018-19 to 116.2 in Q4:2018-19.

Summary Table
Net responses3
 
(per cent)
Parameters Assessment period Expectation period
Q2:2018-19 Q3:2018-19 Q3:2018-19 Q4:2018-19
Production 26.0 24.9 32.5 36.3
Order Books 24.5 19.5 28.9 32.5
Pending Orders 6.0 8.6 3.6 3.6
Capacity Utilisation 12.5 12.6 21.0 23.8
Exports 10.7 12.1 15.9 19.8
Imports 9.8 11.6 12.2 15.7
Employment 8.4 9.4 12.9 12.2
Financial Situation (Overall) 18.6 16.5 26.9 28.7
Availability of Finance (from internal accruals) 14.1 10.8 18.2 19.2
Availability of Finance (from banks and other sources) 12.2 11.2 13.1 16.0
Availability of Finance (from overseas, if applicable) 4.9 2.9 5.2 6.0
Cost of Finance -19.3 -19.5 -19.8 -17.5
Cost of Raw Materials -52.9 -49.2 -44.5 -38.6
Salary/ Other Remuneration -33.5 -28.2 -24.4 -21.4
Selling Price 11.3 6.2 14.3 12.3
Profit Margin -12.2 -11.7 0.1 2.0
Overall Business Situation 27.9 24.6 36.3 36.7
Note: Please see the excel file for time series data

Table 1: Assessment and Expectations for Production
(Percentage responses)@
Quarter Total response Assessment Expectation
Increase Decrease No change Net response# Increase Decrease No change Net response
Q3:2017-18 1299 36.8 14.7 48.5 22.0 43.4 9.1 47.5 34.3
Q4:2017-18 1250 40.7 13.4 45.9 27.3 42.5 8.4 49.2 34.1
Q1:2018-19 1207 39.4 14.0 46.6 25.4 40.4 11.0 48.6 29.5
Q2:2018-19 1095 39.2 13.1 47.7 26.0 43.0 9.8 47.2 33.2
Q3:2018-19 1267 38.2 13.3 48.5 24.9 41.6 9.0 49.4 32.5
Q4:2018-19           43.5 7.2 49.3 36.3
‘Increase’ in production is optimistic.
@:Due to rounding off percentage may not add up to 100.

Table 2: Assessment and Expectations for Order Books
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 35.4 16.2 48.4 19.2 39.6 9.6 50.8 29.9
Q4:2017-18 1250 38.9 14.4 46.6 24.5 40.5 10.2 49.2 30.3
Q1:2018-19 1207 36.2 13.5 50.3 22.7 38.8 10.4 50.8 28.4
Q2:2018-19 1095 37.3 12.8 49.9 24.5 38.4 10.8 50.8 27.7
Q3:2018-19 1267 35.3 15.8 48.9 19.5 38.6 9.6 51.8 28.9
Q4:2018-19           41.0 8.5 50.5 32.5
‘Increase’ in order books is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 3: Assessment and Expectations for Pending Orders
(Percentage responses)
Quarter Total response Assessment Expectation
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q3:2017-18 1299 6.7 16.2 77.1 9.5 4.7 11.4 83.9 6.7
Q4:2017-18 1250 4.5 14.8 80.7 10.3 6.8 12.5 80.7 5.7
Q1:2018-19 1207 5.1 12.4 82.4 7.3 4.9 12.6 82.5 7.6
Q2:2018-19 1095 7.2 13.2 79.7 6.0 6.3 10.7 83.0 4.4
Q3:2018-19 1267 4.7 13.2 82.1 8.6 7.4 11.0 81.6 3.6
Q4:2018-19           6.3 9.9 83.8 3.6
Pending orders ‘Below Normal’ is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 4: Assessment and Expectations for Capacity Utilisation (Main Product)
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 23.9 12.7 63.4 11.3 28.8 8.0 63.2 20.8
Q4:2017-18 1250 27.4 12.6 60.0 14.8 28.4 8.9 62.7 19.5
Q1:2018-19 1207 24.5 12.5 63.0 12.0 27.8 9.8 62.4 17.9
Q2:2018-19 1095 24.4 11.9 63.6 12.5 29.3 7.7 63.0 21.6
Q3:2018-19 1267 24.9 12.3 62.8 12.6 28.3 7.3 64.4 21.0
Q4:2018-19           30.3 6.5 63.1 23.8
‘Increase’ in capacity utilisation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 5: Assessment and Expectations for Level of CU (compared to the average in last 4 quarters)
(Percentage responses)
Quarter Total response Assessment Expectation
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q3:2017-18 1299 10.3 14.1 75.6 -3.8 11.4 9.6 79.0 1.8
Q4:2017-18 1250 12.6 13.5 73.9 -0.9 13.0 10.7 76.2 2.3
Q1:2018-19 1207 11.0 12.9 76.1 -2.0 13.0 10.6 76.5 2.4
Q2:2018-19 1095 11.7 12.3 76.0 -0.6 11.8 9.3 78.9 2.5
Q3:2018-19 1267 10.1 12.9 76.9 -2.8 12.5 9.1 78.4 3.4
Q4:2018-19           12.7 8.6 78.7 4.1
‘Above Normal’ in Level of capacity utilisation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 6: Assessment and Expectations for Assessment of Production Capacity (with regard to expected demand in next 6 months)
(Percentage responses)
Quarter Total response Assessment Expectation
More than adequate Less than adequate Adequate Net response More than adequate Less than adequate Adequate Net response
Q3:2017-18 1299 11.8 7.1 81.2 4.7 11.1 6.5 82.4 4.6
Q4:2017-18 1250 12.2 6.3 81.4 5.9 12.9 6.9 80.2 6.0
Q1:2018-19 1207 10.5 6.6 82.9 3.9 13.0 6.0 81.0 7.0
Q2:2018-19 1095 11.2 7.2 81.6 4.0 11.3 6.0 82.7 5.2
Q3:2018-19 1267 10.3 7.2 82.5 3.0 11.9 6.3 81.8 5.6
Q4:2018-19           10.6 6.1 83.3 4.5
‘More than adequate’ in Assessment of Production Capacity is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 7: Assessment and Expectations for Exports
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 22.5 14.7 62.8 7.8 27.6 8.6 63.8 19.0
Q4:2017-18 1250 26.3 13.8 59.9 12.5 25.4 8.8 65.8 16.6
Q1:2018-19 1207 23.6 14.5 61.8 9.1 28.4 9.8 61.8 18.6
Q2:2018-19 1095 23.7 13.1 63.2 10.7 27.8 9.2 63.0 18.5
Q3:2018-19 1267 25.1 13.0 61.9 12.1 26.1 10.2 63.7 15.9
Q4:2018-19           27.8 8.0 64.2 19.8
‘Increase’ in exports is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 8: Assessment and Expectations for Imports
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 18.2 9.1 72.7 9.1 17.8 5.0 77.2 12.8
Q4:2017-18 1250 19.8 8.7 71.5 11.0 19.7 6.2 74.1 13.5
Q1:2018-19 1207 19.6 8.4 72.0 11.2 19.6 5.8 74.7 13.8
Q2:2018-19 1095 18.3 8.6 73.1 9.8 19.1 5.8 75.1 13.3
Q3:2018-19 1267 20.1 8.5 71.4 11.6 19.3 7.1 73.6 12.2
Q4:2018-19           21.0 5.3 73.7 15.7
‘Increase’ in imports is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 9: Assessment and Expectations for level of Raw Materials Inventory
(Percentage responses)
Quarter Total response Assessment Expectation
Above average Below average Average Net response Above average Below average Average Net response
Q3:2017-18 1299 14.6 6.0 79.4 -8.6 10.4 4.3 85.4 -6.1
Q4:2017-18 1250 14.0 5.9 80.2 -8.1 11.5 6.0 82.5 -5.5
Q1:2018-19 1207 14.6 4.9 80.5 -9.6 10.8 5.7 83.5 -5.2
Q2:2018-19 1095 14.3 6.1 79.6 -8.2 11.0 5.2 83.7 -5.8
Q3:2018-19 1267 14.3 4.6 81.0 -9.7 11.3 4.6 84.1 -6.7
Q4:2018-19           12.1 4.2 83.8 -7.9
‘Below average’ Inventory of raw materials is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 10: Assessment and Expectations for level of Finished Goods Inventory
(Percentage responses)
Quarter Total response Assessment Expectation
Above average Below average Average Net response Above average Below average Average Net response
Q3:2017-18 1299 14.5 6.9 78.6 -7.6 10.0 6.2 83.8 -3.8
Q4:2017-18 1250 13.3 6.5 80.3 -6.8 10.9 6.5 82.6 -4.5
Q1:2018-19 1207 12.0 6.3 81.7 -5.7 10.4 5.8 83.9 -4.6
Q2:2018-19 1095 13.3 6.5 80.2 -6.9 9.9 5.0 85.1 -4.8
Q3:2018-19 1267 15.0 4.9 80.1 -10.0 10.8 5.2 83.9 -5.6
Q4:2018-19           11.1 4.6 84.3 -6.5
‘Below average’ Inventory of finished goods is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 11: Assessment and Expectations for Employment Outlook
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 15.8 7.4 76.8 8.4 15.8 5.3 78.9 10.4
Q4:2017-18 1250 17.5 8.1 74.4 9.4 17.0 5.3 77.7 11.7
Q1:2018-19 1207 18.1 7.2 74.6 10.9 17.7 6.6 75.7 11.1
Q2:2018-19 1095 16.2 7.8 76.1 8.4 17.6 4.7 77.7 12.9
Q3:2018-19 1267 16.1 6.7 77.1 9.4 17.1 4.2 78.7 12.9
Q4:2018-19           17.0 4.8 78.2 12.2
‘Increase’ in employment is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 12: Assessment and Expectations for Overall Financial Situation
(Percentage responses)
Quarter Total response Assessment Expectation
Better Worsen No change Net response Better Worsen No change Net response
Q3:2017-18 1299 28.6 11.4 60.0 17.1 35.3 6.6 58.1 28.7
Q4:2017-18 1250 31.9 9.5 58.6 22.4 35.2 6.6 58.2 28.6
Q1:2018-19 1207 31.0 10.3 58.7 20.7 34.5 6.5 59.0 28.0
Q2:2018-19 1095 30.0 11.3 58.7 18.6 35.1 7.2 57.6 27.9
Q3:2018-19 1267 28.5 11.9 59.6 16.5 34.4 7.5 58.0 26.9
Q4:2018-19           35.2 6.5 58.3 28.7
‘Better’ overall financial situation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 13: Assessment and Expectations for Working Capital Finance Requirement
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 34.4 5.0 60.6 29.4 30.5 4.1 65.4 26.4
Q4:2017-18 1250 35.5 5.3 59.2 30.1 32.4 3.6 64.0 28.8
Q1:2018-19 1207 32.4 4.8 62.8 27.7 30.8 5.3 63.9 25.4
Q2:2018-19 1095 30.4 5.5 64.2 24.9 30.8 4.5 64.7 26.3
Q3:2018-19 1267 30.5 5.6 63.9 24.9 30.6 4.0 65.4 26.6
Q4:2018-19           29.9 4.4 65.7 25.6
‘Increase’ in working capital finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 14: Assessment and Expectations for Availability of Finance (from Internal Accruals)
(Percentage responses)
Quarter Total response Assessment Expectation
Improve Worsen No change Net response Improve Worsen No change Net response
Q3:2017-18 1299 22.2 8.4 69.3 13.8 25.8 5.6 68.6 20.2
Q4:2017-18 1250 23.7 8.9 67.4 14.7 26.6 5.2 68.2 21.4
Q1:2018-19 1207 24.2 8.2 67.5 16.0 25.1 6.9 67.9 18.2
Q2:2018-19 1095 24.3 10.2 65.5 14.1 25.1 6.5 68.3 18.6
Q3:2018-19 1267 21.2 10.4 68.4 10.8 24.9 6.7 68.3 18.2
Q4:2018-19           25.4 6.2 68.4 19.2
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 15: Assessment and Expectations for Availability of Finance (from banks and other sources)
(Percentage responses)
Quarter Total response Assessment Expectation
Improve Worsen No change Net response Improve Worsen No change Net response
Q3:2017-18 1299 19.8 5.8 74.4 14.0 18.6 4.5 77.0 14.1
Q4:2017-18 1250 18.8 7.0 74.2 11.9 20.9 4.4 74.7 16.5
Q1:2018-19 1207 19.0 7.3 73.7 11.7 20.9 6.4 72.7 14.6
Q2:2018-19 1095 18.7 6.4 74.9 12.2 19.9 5.6 74.4 14.3
Q3:2018-19 1267 17.2 6.0 76.8 11.2 19.0 5.9 75.1 13.1
Q4:2018-19           20.1 4.1 75.8 16.0
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 16: Assessment and Expectations for Availability of Finance (from overseas, if applicable)
(Percentage responses)
Quarter Total response Assessment Expectation
Improve Worsen No change Net response Improve Worsen No change Net response
Q3:2017-18 1299 7.9 3.9 88.1 4.0 7.2 3.0 89.8 4.1
Q4:2017-18 1250 8.0 4.6 87.4 3.4 9.2 2.6 88.2 6.6
Q1:2018-19 1207 7.1 5.7 87.1 1.4 8.6 4.3 87.1 4.3
Q2:2018-19 1095 9.0 4.0 87.0 4.9 9.0 4.6 86.4 4.4
Q3:2018-19 1267 6.9 4.0 89.1 2.9 9.5 4.3 86.2 5.2
Q4:2018-19           9.0 3.0 88.0 6.0
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 17: Assessment and Expectations for Cost of Finance
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 14.5 11.6 73.9 -3.0 14.1 11.9 74.0 -2.2
Q4:2017-18 1250 18.1 7.9 74.0 -10.3 13.9 9.8 76.3 -4.1
Q1:2018-19 1207 25.3 5.4 69.2 -19.9 18.7 6.4 74.9 -12.2
Q2:2018-19 1095 25.7 6.4 67.9 -19.3 24.1 4.8 71.1 -19.3
Q3:2018-19 1267 24.9 5.4 69.7 -19.5 24.7 4.9 70.4 -19.8
Q4:2018-19           22.3 4.8 73.0 -17.5
‘Decrease’ in cost of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 18: Assessment and Expectations for Cost of Raw Materials
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 47.9 5.2 46.8 -42.7 37.6 5.7 56.7 -31.9
Q4:2017-18 1250 52.8 3.3 43.9 -49.5 38.3 4.3 57.4 -34.0
Q1:2018-19 1207 55.9 2.8 41.3 -53.0 42.7 3.7 53.6 -39.0
Q2:2018-19 1095 55.5 2.6 41.8 -52.9 46.2 2.8 50.9 -43.4
Q3:2018-19 1267 53.1 3.9 43.1 -49.2 46.5 1.9 51.6 -44.5
Q4:2018-19           42.1 3.5 54.3 -38.6
‘Decrease’ in cost of raw materials is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 19: Assessment and Expectations for Salary/Other Remuneration
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 29.4 2.2 68.4 -27.2 25.9 2.0 72.1 -23.9
Q4:2017-18 1250 28.8 2.2 69.0 -26.6 25.2 2.3 72.5 -22.9
Q1:2018-19 1207 42.0 2.1 55.9 -40.0 36.8 1.8 61.3 -35.0
Q2:2018-19 1095 35.5 2.0 62.5 -33.5 32.8 1.2 65.9 -31.6
Q3:2018-19 1267 29.8 1.6 68.6 -28.2 25.6 1.2 73.2 -24.4
Q4:2018-19           22.8 1.4 75.8 -21.4
‘Decrease’ in Salary / other remuneration is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 20: Assessment and Expectations for Selling Price
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 17.7 13.2 69.0 4.5 17.5 10.6 71.9 7.0
Q4:2017-18 1250 19.3 12.6 68.1 6.7 17.4 9.5 73.2 7.9
Q1:2018-19 1207 23.0 11.4 65.6 11.5 19.2 8.9 71.9 10.4
Q2:2018-19 1095 22.1 10.7 67.2 11.3 18.5 9.6 71.9 8.8
Q3:2018-19 1267 19.9 13.7 66.4 6.2 21.0 6.7 72.3 14.3
Q4:2018-19           19.4 7.1 73.5 12.3
‘Increase’ in selling price is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 21: Assessment and Expectations for Profit Margin
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2017-18 1299 15.4 25.4 59.1 -10.0 19.6 17.8 62.5 1.8
Q4:2017-18 1250 16.2 26.1 57.7 -9.9 18.8 18.7 62.5 0.1
Q1:2018-19 1207 15.5 25.8 58.7 -10.3 18.0 18.7 63.3 -0.7
Q2:2018-19 1095 14.3 26.5 59.2 -12.2 18.0 18.0 64.0 0.0
Q3:2018-19 1267 16.1 27.8 56.1 -11.7 17.1 17.0 65.9 0.1
Q4:2018-19           18.7 16.7 64.5 2.0
‘Increase’ in profit margin is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 22: Assessment and Expectations for Overall Business Situation
(Percentage responses)
Quarter Total response Assessment Expectation
Better Worsen No change Net response Better Worsen No change Net response
Q3:2017-18 1299 35.1 11.2 53.7 23.9 42.9 6.0 51.1 36.9
Q4:2017-18 1250 39.2 9.0 51.8 30.2 42.5 6.4 51.2 36.1
Q1:2018-19 1207 38.7 9.0 52.3 29.6 42.7 5.8 51.5 36.9
Q2:2018-19 1095 38.1 10.3 51.6 27.9 40.5 5.9 53.6 34.6
Q3:2018-19 1267 34.9 10.3 54.8 24.6 43.3 7.0 49.8 36.3
Q4:2018-19           43.2 6.5 50.3 36.7
‘Better’ Overall Business Situation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 23: Business Sentiments
Quarter Business Assessment Index (BAI) Business Expectations Index (BEI)
Q3:2017-18 109.8 115.0
Q4:2017-18 112.4 115.8
Q1:2018-19 108.4 114.6
Q2:2018-19 110.0 114.1
Q3:2018-19 107.1 115.0
Q4:2018-19   116.2

1 The survey responses are those of the respondents and are not necessarily shared by the Reserve Bank of India. The 83rd round (Q2:2018-19) survey results were released on October 5, 2018 on the RBI website.

2 For each of the survey round, two indices are computed - one based on assessment namely Business Assessment Index (BAI) and another based on expectations, namely Business Expectations Index (BEI). Each indicator for the respective period is calculated as a weighted (share of GVA of different industry group) net response of nine business indicators. The nine indicators considered are: (1) overall business situation; (2) production; (3) order books; (4) inventory of raw material; (5) inventory of finished goods; (6) profit margins; (7) employment; (8) exports; and (9) capacity utilisation. BAI/BEI gives a snapshot of the business outlook in every quarter and takes values between 0 and 200, with 100 being the threshold separating expansion from contraction.

3 Net Response (NR) is the difference in percentage of the respondents reporting optimism and that reporting pessimism. The range is -100 to 100. Any value greater than zero indicates expansion/optimism and any value less than zero indicates contraction/pessimism. NR = (I – D), where, I is the percentage response of ‘Increase/optimism’, and D is the percentage response of ‘Decrease/pessimism’ and E is the percentage response as ‘no change/Equal’; I+D+E=100. For example, increase in production is optimism whereas decrease in cost of raw material is optimism.

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