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Date : Feb 08, 2023
Industrial Outlook Survey of the Manufacturing Sector for Q3:2022-23

Today, the Reserve Bank released the results of 100th round of its industrial outlook survey (IOS). The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q3:2022-23 and their expectations for Q4:2022-231 as well as outlook for the two subsequent quarters. In all, 1,356 companies responded in this round of the survey, which was conducted during Q3:2022-23.

Highlights:

A. Assessment for Q3: 2022-23

  • Respondents from manufacturing sector polled for demand expansion in Q3:2022-23 in terms of improved assessment for production, order books, capacity utilisation and employment situation compared to the previous round of the survey (Table A).

  • Manufacturers assessed some moderation in the pace of increase in raw material cost and higher salary outgo and cost of finance during the quarter.

  • Respondents reported deceleration in selling prices during Q3:2022-23 with net negative sentiments on profit margin.

  • Overall business sentiments remained buoyant as reflected through improved business assessment index (BAI)2 at 108.6 for Q3:2022-23, as against 106.7 in the previous quarter (Chart 1).

B. Expectations for Q4: 2022-23

  • Respondents retained optimistic outlook on demand conditions for Q4:2022-23, with marginally waned expectations on order books, employment and foreign trade.

  • Cost pressures from financing, purchase of raw materials and wages are likely to continue with some softening during Q4:2022-23.

  • Selling prices and profit margins are expected to continue to rise with some curb as a majority of respondents expect ‘no change’.

  • Manufacturers remained highly optimistic about overall business conditions with the business expectations index (BEI) remaining elevated at 132.9 in Q4:2022-23 though it moderated marginally on a sequential basis (Chart 1).

Chart 1: Business Sentiments

C. Expectations for Q1:2023-24 and Q2:2023-24

  • Manufacturers remain optimistic on demand conditions for next two expectations quarters as reflected in highly positive sentiments on production, order books, employment condition, capacity utilisation and overall business situation (Table B).

  • Input cost pressures for manufacturing sector is likely to continue with some easing and selling price growth is expected to remain elevated with softening bias during H1:2023-24.

Table A: Summary of Net responses3 on Survey Parameters
(per cent)
Parameters Assessment period Expectation period
Q2:2022-23 Q3:2022-23 Q3:2022-23 Q4:2022-23
Production 18.1 25.1 56.2 57.4
Order Books 18.6 21.0 62.4 59.4
Pending Orders 7.3 6.2 -0.7 1.2
Capacity Utilisation 8.6 14.9 46.6 47.2
Inventory of Raw Materials -4.6 -10.8 -25.7 -26.8
Inventory of Finished Goods -4.0 -9.5 -26.5 -26.1
Exports 11.1 8.5 56.0 51.5
Imports 13.4 11.6 57.6 51.5
Employment 12.5 13.6 43.8 36.4
Financial Situation (Overall) 13.9 20.1 57.7 60.6
Availability of Finance (from internal accruals) 15.9 21.9 49.3 53.5
Availability of Finance (from banks & other sources) 15.4 17.0 55.1 49.2
Availability of Finance (from overseas, if applicable) 10.6 10.7 58.9 50.1
Cost of Finance -30.1 -31.1 -51.9 -50.5
Cost of Raw Material -72.5 -64.9 -64.2 -60.9
Salary/ Other Remuneration -26.4 -27.0 -46.0 -38.7
Selling Price 14.4 10.4 45.1 39.6
Profit Margin -9.3 -8.4 35.2 32.9
Overall Business Situation 15.8 20.3 59.4 63.1

Table B: Business Expectations of Select Parameters for extended period – Net response
(per cent)
Parameters Round 99 Round 100
Q3:2022-23 Q4:2022-23 Q1:2023-24 Q2:2023-24
Overall Business Situation 59.4 63.1 59.0 60.2
Production 56.2 57.4 57.3 58.3
Order Books 62.4 59.4 53.1 53.3
Capacity Utilisation 46.6 47.2 55.0 55.3
Employment 43.8 36.4 44.3 38.7
Cost of Raw Materials -64.2 -60.9 -52.7 -51.9
Selling Prices 45.1 39.6 45.6 40.0

Note: Please see the excel file for time series data

Table 1: Assessment and Expectations for Production
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 42.5 11.6 45.9 30.9 75.3 3.8 20.9 71.5
Q4:2021-22 1,283 38.0 14.2 47.8 23.8 66.5 5.3 28.3 61.2
Q1:2022-23 1,239 36.6 14.4 48.9 22.2 70.4 4.9 24.7 65.6
Q2:2022-23 1,234 34.3 16.3 49.4 18.1 72.4 5.0 22.6 67.4
Q3:2022-23 1,356 40.5 15.4 44.1 25.1 60.8 4.6 34.5 56.2
Q4:2022-23           61.2 3.8 34.9 57.4
‘Increase’ in production is optimistic.
Note: The sum of components may not add up to total due to rounding off (This is applicable for all tables).

Table 2: Assessment and Expectations for Order Books
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 39.0 9.5 51.5 29.5 73.9 3.6 22.4 70.3
Q4:2021-22 1,283 34.7 13.4 51.9 21.3 66.2 4.7 29.1 61.5
Q1:2022-23 1,239 34.1 12.5 53.4 21.7 70.4 4.2 25.4 66.1
Q2:2022-23 1,234 30.7 12.1 57.2 18.6 72.7 4.6 22.6 68.1
Q3:2022-23 1,356 33.1 12.1 54.8 21.0 67.1 4.7 28.3 62.4
Q4:2022-23           63.3 3.9 32.8 59.4
‘Increase’ in order books is optimistic.

Table 3: Assessment and Expectations for Pending Orders
(Percentage responses)
Quarter Total response Assessment Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q3:2021-22 1,082 7.2 10.9 81.9 3.6 8.8 4.8 86.4 -4.1
Q4:2021-22 1,283 9.8 13.7 76.5 3.9 8.5 7.9 83.6 -0.5
Q1:2022-23 1,239 6.7 14.2 79.1 7.5 8.8 10.6 80.6 1.8
Q2:2022-23 1,234 10.3 17.6 72.0 7.3 7.7 10.3 82.1 2.6
Q3:2022-23 1,356 8.4 14.6 76.9 6.2 10.8 10.1 79.2 -0.7
Q4:2022-23           8.9 10.1 81.0 1.2
Pending orders ‘Below Normal’ is optimistic.

Table 4: Assessment and Expectations for Capacity Utilisation (Main Product)
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 31.2 9.0 59.8 22.2 68.3 3.1 28.5 65.2
Q4:2021-22 1,283 30.2 13.0 56.9 17.2 57.0 4.5 38.5 52.6
Q1:2022-23 1,239 29.5 12.8 57.7 16.8 63.5 4.5 32.0 59.0
Q2:2022-23 1,234 23.4 14.8 61.8 8.6 65.6 5.0 29.4 60.6
Q3:2022-23 1,356 29.8 15.0 55.2 14.9 51.5 4.9 43.6 46.6
Q4:2022-23           51.3 4.1 44.6 47.2
‘Increase’ in capacity utilisation is optimistic.

Table 5: Assessment and Expectations for Level of CU (compared to the average in last 4 quarters)
(Percentage responses)
Quarter Total response Assessment Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q3:2021-22 1,082 12.6 8.4 78.9 4.2 30.4 3.7 65.9 26.7
Q4:2021-22 1,283 12.6 10.8 76.6 1.9 30.1 5.8 64.2 24.3
Q1:2022-23 1,239 19.6 10.4 70.0 9.2 39.3 5.4 55.4 33.9
Q2:2022-23 1,234 20.5 12.8 66.7 7.8 50.2 6.3 43.5 43.9
Q3:2022-23 1,356 28.7 13.2 58.1 15.5 37.0 6.1 56.9 30.9
Q4:2022-23           34.7 8.1 57.2 26.7
‘Above Normal’ in Level of capacity utilisation is optimistic.

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 Expectations
More than adequate Less than adequate Adequate Net response More than adequate Less than adequate Adequate Net response
Q3:2021-22 1,082 13.2 6.1 80.6 7.1 31.0 4.0 65.1 27.0
Q4:2021-22 1,283 14.1 7.1 78.8 7.1 30.7 4.0 65.3 26.7
Q1:2022-23 1,239 25.2 7.2 67.6 18.0 42.7 3.9 53.5 38.8
Q2:2022-23 1,234 21.1 6.8 72.1 14.3 51.5 5.4 43.0 46.1
Q3:2022-23 1,356 28.9 4.4 66.7 24.6 42.9 4.5 52.7 38.4
Q4:2022-23           42.7 3.3 53.9 39.4
‘More than adequate’ in Assessment of Production Capacity is optimistic.

Table 7: Assessment and Expectations for Exports
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 29.8 9.7 60.5 20.0 67.3 3.1 29.6 64.3
Q4:2021-22 1,283 25.3 12.6 62.1 12.7 59.2 4.5 36.4 54.7
Q1:2022-23 1,239 25.5 11.2 63.4 14.3 62.4 4.4 33.2 58.0
Q2:2022-23 1,234 25.2 14.0 60.8 11.1 65.2 4.4 30.4 60.8
Q3:2022-23 1,356 25.6 17.1 57.3 8.5 61.2 5.2 33.6 56.0
Q4:2022-23           55.5 3.9 40.6 51.5
‘Increase’ in exports is optimistic.

Table 8: Assessment and Expectations for Imports
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 26.8 6.9 66.3 19.9 63.4 2.9 33.7 60.4
Q4:2021-22 1,283 22.9 11.6 65.4 11.3 55.6 3.8 40.6 51.8
Q1:2022-23 1,239 23.9 9.0 67.0 14.9 59.7 3.4 36.9 56.4
Q2:2022-23 1,234 23.5 10.1 66.4 13.4 64.5 3.2 32.3 61.3
Q3:2022-23 1,356 23.8 12.2 64.0 11.6 60.8 3.2 36.0 57.6
Q4:2022-23           54.3 2.8 42.9 51.5
‘Increase’ in imports is optimistic.

Table 9: Assessment and Expectations for level of Raw Materials Inventory
(Percentage responses)
Quarter Total response Assessment Expectations
Above average Below average Average Net response Above average Below average Average Net response
Q3:2021-22 1,082 16.5 5.1 78.4 -11.4 33.7 4.4 61.9 -29.4
Q4:2021-22 1,283 14.7 6.9 78.4 -7.8 32.7 3.7 63.5 -29.0
Q1:2022-23 1,239 16.8 7.0 76.1 -9.8 42.4 3.6 54.0 -38.8
Q2:2022-23 1,234 15.0 10.5 74.5 -4.6 46.1 4.6 49.3 -41.5
Q3:2022-23 1,356 18.1 7.3 74.6 -10.8 32.8 7.1 60.1 -25.7
Q4:2022-23           32.4 5.6 62.0 -26.8
‘Below average’ Inventory of raw materials is optimistic.

Table 10: Assessment and Expectations for level of Finished Goods Inventory
(Percentage responses)
Quarter Total response Assessment Expectations
Above average Below average Average Net response Above average Below average Average Net response
Q3:2021-22 1,082 15.3 5.5 79.2 -9.8 34.4 3.8 61.8 -30.7
Q4:2021-22 1,283 13.7 7.2 79.0 -6.5 31.1 3.9 64.9 -27.2
Q1:2022-23 1,239 16.4 7.4 76.2 -9.0 42.4 3.0 54.6 -39.5
Q2:2022-23 1,234 14.2 10.2 75.6 -4.0 45.6 4.3 50.1 -41.3
Q3:2022-23 1,356 17.1 7.7 75.2 -9.5 33.4 6.9 59.7 -26.5
Q4:2022-23           31.9 5.8 62.3 -26.1
‘Below average’ Inventory of finished goods is optimistic.

Table 11: Assessment and Expectations for Employment
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 25.3 5.4 69.3 19.8 52.2 1.3 46.5 50.9
Q4:2021-22 1,283 20.3 8.9 70.8 11.4 49.2 2.0 48.8 47.2
Q1:2022-23 1,239 23.4 8.1 68.4 15.3 52.7 2.5 44.7 50.2
Q2:2022-23 1,234 21.5 9.0 69.5 12.5 57.1 2.1 40.8 54.9
Q3:2022-23 1,356 23.0 9.4 67.7 13.6 45.0 1.2 53.9 43.8
Q4:2022-23           39.0 2.5 58.5 36.4
‘Increase’ in employment is optimistic.

Table 12: Assessment and Expectations for Overall Financial Situation
(Percentage responses)
Quarter Total response Assessment Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q3:2021-22 1,082 38.1 9.8 52.0 28.3 71.5 2.9 25.7 68.6
Q4:2021-22 1,283 33.9 13.2 53.0 20.7 64.0 4.7 31.3 59.3
Q1:2022-23 1,239 33.0 12.3 54.7 20.6 69.3 3.9 26.7 65.4
Q2:2022-23 1,234 28.7 14.8 56.4 13.9 70.4 3.4 26.2 67.1
Q3:2022-23 1,356 35.6 15.5 49.0 20.1 61.4 3.8 34.8 57.7
Q4:2022-23           63.9 3.3 32.8 60.6
‘Better’ overall financial situation is optimistic.

Table 13: Assessment and Expectations for Working Capital Finance Requirement
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 31.6 4.5 63.9 27.1 63.3 2.2 34.4 61.1
Q4:2021-22 1,283 31.4 8.1 60.5 23.3 54.7 2.9 42.4 51.7
Q1:2022-23 1,239 33.4 7.9 58.7 25.5 62.8 1.4 35.7 61.4
Q2:2022-23 1,234 29.6 6.8 63.5 22.8 65.0 2.6 32.5 62.4
Q3:2022-23 1,356 35.2 7.3 57.5 27.9 51.2 1.6 47.3 49.6
Q4:2022-23           52.3 1.1 46.5 51.2
‘Increase’ in working capital finance is optimistic.

Table 14: Assessment and Expectations for Availability of Finance (from Internal Accruals)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q3:2021-22 1,082 30.6 5.8 63.6 24.8 64.1 2.1 33.8 61.9
Q4:2021-22 1,283 27.7 9.6 62.7 18.1 55.7 2.8 41.5 52.9
Q1:2022-23 1,239 27.8 9.7 62.4 18.1 62.4 2.5 35.2 59.9
Q2:2022-23 1,234 24.0 8.0 68.0 15.9 64.2 2.4 33.4 61.9
Q3:2022-23 1,356 31.1 9.1 59.8 21.9 51.3 2.0 46.7 49.3
Q4:2022-23           55.2 1.7 43.1 53.5
‘Improvement’ in availability of finance is optimistic.

Table 15: Assessment and Expectations for Availability of Finance (from banks and other sources)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q3:2021-22 1,082 26.2 3.9 69.9 22.4 60.6 1.9 37.5 58.7
Q4:2021-22 1,283 24.1 8.0 68.0 16.1 52.0 2.1 45.9 49.8
Q1:2022-23 1,239 24.8 7.6 67.5 17.2 59.3 1.5 39.2 57.8
Q2:2022-23 1,234 21.9 6.5 71.6 15.4 62.2 1.8 36.1 60.4
Q3:2022-23 1,356 26.0 9.1 64.9 17.0 56.7 1.7 41.6 55.1
Q4:2022-23           50.5 1.3 48.2 49.2
‘Improvement’ in availability of finance is optimistic.

Table 16: Assessment and Expectations for Availability of Finance (from overseas, if applicable)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q3:2021-22 1,082 22.4 3.4 74.1 19.0 66.5 0.6 32.8 65.9
Q4:2021-22 1,283 17.9 8.7 73.4 9.1 52.5 1.5 46.0 50.9
Q1:2022-23 1,239 21.9 7.5 70.6 14.4 60.2 0.9 38.9 59.2
Q2:2022-23 1,234 17.4 6.8 75.8 10.6 65.8 1.2 33.0 64.6
Q3:2022-23 1,356 20.4 9.7 69.9 10.7 59.6 0.8 39.6 58.9
Q4:2022-23           51.3 1.3 47.4 50.1
‘Improvement’ in availability of finance is optimistic.

Table 17: Assessment and Expectations for Cost of Finance
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 24.9 5.5 69.5 -19.4 58.3 2.5 39.3 -55.8
Q4:2021-22 1,283 22.1 9.6 68.3 -12.6 50.7 2.1 47.2 -48.6
Q1:2022-23 1,239 30.5 6.9 62.6 -23.6 57.0 2.1 40.9 -54.9
Q2:2022-23 1,234 36.1 6.1 57.8 -30.1 65.6 1.6 32.8 -64.0
Q3:2022-23 1,356 37.0 5.9 57.1 -31.1 53.5 1.6 44.9 -51.9
Q4:2022-23           51.6 1.1 47.3 -50.5
‘Decrease’ in cost of finance is optimistic.

Table 18: Assessment and Expectations for Cost of Raw Materials
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 62.0 3.2 34.8 -58.8 76.6 1.4 22.1 -75.2
Q4:2021-22 1,283 55.0 5.5 39.4 -49.5 75.1 1.5 23.3 -73.6
Q1:2022-23 1,239 85.5 1.1 13.3 -84.4 78.2 1.2 20.6 -77.0
Q2:2022-23 1,234 77.0 4.6 18.4 -72.5 80.6 1.6 17.9 -79.0
Q3:2022-23 1,356 73.0 8.1 18.9 -64.9 66.8 2.6 30.7 -64.2
Q4:2022-23           63.4 2.4 34.2 -60.9
‘Decrease’ in cost of raw materials is optimistic.

Table 19: Assessment and Expectations for Salary/Other Remuneration
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 29.3 2.4 68.3 -26.9 51.2 0.9 47.9 -50.4
Q4:2021-22 1,283 24.6 6.4 69.0 -18.2 50.9 1.0 48.2 -49.9
Q1:2022-23 1,239 39.6 4.8 55.5 -34.8 66.3 0.7 33.0 -65.6
Q2:2022-23 1,234 30.8 4.4 64.7 -26.4 61.3 0.4 38.3 -60.8
Q3:2022-23 1,356 30.1 3.1 66.8 -27.0 46.3 0.3 53.4 -46.0
Q4:2022-23           39.3 0.6 60.0 -38.7
‘Decrease’ in Salary / other remuneration is optimistic.

Table 20: Assessment and Expectations for Selling Price
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 34.5 6.3 59.2 28.2 59.7 2.3 38.0 57.4
Q4:2021-22 1,283 30.0 9.7 60.2 20.3 54.0 3.7 42.3 50.3
Q1:2022-23 1,239 33.3 8.3 58.4 25.0 59.5 3.8 36.7 55.7
Q2:2022-23 1,234 25.1 10.7 64.2 14.4 63.4 3.2 33.4 60.3
Q3:2022-23 1,356 23.3 12.9 63.8 10.4 48.8 3.7 47.5 45.1
Q4:2022-23           43.2 3.6 53.1 39.6
‘Increase’ in selling price is optimistic.

Table 21: Assessment and Expectations for Profit Margin
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q3:2021-22 1,082 22.8 19.0 58.2 3.8 59.9 8.2 31.9 51.7
Q4:2021-22 1,283 20.6 21.8 57.6 -1.2 49.5 9.7 40.8 39.8
Q1:2022-23 1,239 22.5 20.7 56.7 1.8 53.6 10.4 35.9 43.2
Q2:2022-23 1,234 16.2 25.5 58.2 -9.3 57.6 10.1 32.3 47.4
Q3:2022-23 1,356 17.6 26.1 56.3 -8.4 44.2 9.0 46.8 35.2
Q4:2022-23           41.0 8.1 50.9 32.9
‘Increase’ in profit margin is optimistic.

Table 22: Assessment and Expectations for Overall Business Situation
(Percentage responses)
Quarter Total response Assessment Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q3:2021-22 1,082 42.3 9.8 47.9 32.5 73.1 2.8 24.1 70.3
Q4:2021-22 1,283 37.7 13.6 48.8 24.1 67.6 4.2 28.2 63.4
Q1:2022-23 1,239 36.0 13.8 50.2 22.3 71.8 3.8 24.4 68.0
Q2:2022-23 1,234 31.6 15.7 52.7 15.8 73.9 3.2 22.9 70.7
Q3:2022-23 1,356 37.7 17.4 44.9 20.3 63.8 4.4 31.7 59.4
Q4:2022-23           66.9 3.7 29.4 63.1
‘Better’ Overall Business Situation is optimistic.

Table 23: Business Sentiments
Quarter Business Assessment Index (BAI) Business Expectations Index (BEI)
Q3:2021-22 115.0 139.3
Q4:2021-22 111.5 137.8
Q1:2022-23 110.1 134.7
Q2:2022-23 106.7 137.5
Q3:2022-23 108.6 134.4
Q4:2022-23   132.9

1 The survey results reflect the respondents’ views, which are not necessarily shared by the Reserve Bank. Results of the previous survey round were released on the Bank’s website on September 30, 2022.

2 For each survey round, two summary indices are computed – one based on assessment [viz., Business Assessment Index (BAI)] and another based on expectations [viz., Business Expectations Index (BEI)]. Each index is a composite indicator calculated as a simple average of nine business parameters, where each parameter is derived as a weighted net response, weights being the share of industry groups in gross value added (GVA). The nine parameters 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 between the percentage of respondents reporting optimism and those reporting pessimism. It ranges between -100 to 100. Any value greater than zero indicates expansion/optimism and any value less than zero indicates contraction/pessimism. In other words, 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.e., I+D+E=100). For example, increase in production is optimism whereas decrease in cost of raw material is optimism.

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