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Date : Apr 06, 2023
Industrial Outlook Survey of the Manufacturing Sector for Q4:2022-23

Today, the Reserve Bank released the results of 101st round of its industrial outlook survey (IOS). The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q4:2022-23 and their expectations for Q1:2023-241 as well as outlook on selected parameters for the two subsequent quarters. In all, 1,066 companies responded in this round of the survey, which was conducted during Q4:2022-23.

Highlights:

A. Assessment for Q4: 2022-23

  • Respondents from manufacturing sector were positive on demand conditions in Q4:2022-23 in terms of improved assessment for overall business situation, production, order books and capacity utilisation compared to the previous round of the survey (Table A).

  • Manufacturers assessed some moderation in the pace of increase in raw material cost and wage cost and were more positive on their financial situation during the quarter.

  • Respondents reported deceleration in selling prices during Q4:2022-23; the sentiments on profit margin were less pessimistic than a quarter ago.

  • Overall business sentiments remained buoyant as reflected through improved business assessment index (BAI)2 at 112.2 for Q4:2022-23, as against 108.6 in the previous quarter (Chart 1).

B. Expectations for Q1: 2023-24

  • Manufacturers were less optimistic on demand conditions during Q1:2023-24 as reflected in lower expectations for production, order books, capacity utilisation and foreign trade.

  • Cost pressures from financing, purchase of raw materials and wages are likely to continue during Q1:2023-24.

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

  • Business expectations index (BEI) for Q1:2023-24 exhibited further sign of normalisation by moderating notably at 126.4 from 132.9 in the previous quarter; it, however, remained highly positive (Chart 1).

Chart 1: Business Sentiments

C. Expectations for Q2:2023-24 and Q3:2023-24

  • Manufacturers remain highly optimistic on production, order books, employment, capacity utilisation and overall business situation (Table B).

  • Overall business situation is likely to improve further.

Table A: Summary of Net responses3 on Survey Parameters
(per cent)
Parameters Assessment period Expectation period
Q3:2022-23 Q4:2022-23 Q4:2022-23 Q1:2023-24
Production 25.1 33.0 57.4 54.8
Order Books 21.0 25.4 59.4 47.8
Pending Orders 6.2 8.9 1.2 3.4
Capacity Utilisation 14.9 22.8 47.2 41.2
Inventory of Raw Materials -10.8 -8.3 -26.8 -18.0
Inventory of Finished Goods -9.5 -8.2 -26.1 -17.2
Exports 8.5 12.2 51.5 36.2
Imports 11.6 15.3 51.5 33.2
Employment 13.6 12.4 36.4 26.7
Financial Situation (Overall) 20.1 30.6 60.6 52.9
Availability of Finance (from internal accruals) 21.9 28.8 53.5 46.6
Availability of Finance (from banks & other sources) 17.0 23.3 49.2 40.1
Availability of Finance (from overseas, if applicable) 10.7 7.6 50.1 32.5
Cost of Finance -31.1 -32.4 -50.5 -45.8
Cost of Raw Material -64.9 -59.1 -60.9 -60.9
Salary/ Other Remuneration -27.0 -21.2 -38.7 -44.3
Selling Price 10.4 9.7 39.6 28.4
Profit Margin -8.4 -5.4 32.9 19.1
Overall Business Situation 20.3 34.4 63.1 58.3

Table B: Business Expectations of Select Parameters for extended period – Net response
(per cent)
Parameters Round 100 Round 101
Q4:2022-23 Q1:2023-24 Q2:2023-24 Q3:2023-24
Overall Business Situation 63.1 58.3 58.5 60.6
Production 57.4 54.8 55.7 58.7
Order Books 59.4 47.8 52.7 53.5
Capacity Utilisation 47.2 41.2 52.4 52.9
Employment 36.4 26.7 32.5 29.7
Cost of Raw Materials -60.9 -60.9 -55.8 -54.1
Selling Prices 39.6 28.4 34.4 30.8

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
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 1,066 46.3 13.3 40.4 33.0 61.2 3.8 34.9 57.4
Q1:2023-24           60.6 5.8 33.6 54.8
‘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
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 1,066 37.2 11.8 51.0 25.4 63.3 3.9 32.8 59.4
Q1:2023-24           54.6 6.8 38.6 47.8
‘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
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 1,066 4.2 13.1 82.7 8.9 8.9 10.1 81.0 1.2
Q1:2023-24           4.5 8.0 87.5 3.4
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
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 1,066 34.3 11.5 54.1 22.8 51.3 4.1 44.6 47.2
Q1:2023-24           46.7 5.5 47.8 41.2
‘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
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 1,066 19.8 10.5 69.7 9.3 34.7 8.1 57.2 26.7
Q1:2023-24           23.7 6.2 70.2 17.5
‘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
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 1,066 17.3 5.7 77.0 11.6 42.7 3.3 53.9 39.4
Q1:2023-24           25.3 3.8 70.9 21.5
‘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
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 1,066 25.4 13.3 61.3 12.2 55.5 3.9 40.6 51.5
Q1:2023-24           43.0 6.8 50.2 36.2
‘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
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 1,066 22.6 7.3 70.1 15.3 54.3 2.8 42.9 51.5
Q1:2023-24           37.4 4.2 58.4 33.2
‘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
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 1,066 13.1 4.7 82.2 -8.3 32.4 5.6 62.0 -26.8
Q1:2023-24           20.5 2.5 76.9 -18.0
‘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
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 1,066 13.3 5.1 81.5 -8.2 31.9 5.8 62.3 -26.1
Q1:2023-24           19.9 2.8 77.3 -17.2
‘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
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 1,066 19.3 7.0 73.7 12.4 39.0 2.5 58.5 36.4
Q1:2023-24           29.8 3.1 67.1 26.7
‘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
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 1,066 40.2 9.6 50.2 30.6 63.9 3.3 32.8 60.6
Q1:2023-24           56.3 3.4 40.3 52.9
‘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
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 1,066 36.4 4.3 59.3 32.1 52.3 1.1 46.5 51.2
Q1:2023-24           48.0 1.9 50.0 46.1
‘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
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 1,066 33.3 4.5 62.2 28.8 55.2 1.7 43.1 53.5
Q1:2023-24           48.7 2.0 49.3 46.6
‘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
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 1,066 27.8 4.5 67.7 23.3 50.5 1.3 48.2 49.2
Q1:2023-24           42.2 2.1 55.7 40.1
‘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
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 1,066 11.1 3.6 85.3 7.6 51.3 1.3 47.4 50.1
Q1:2023-24           34.3 1.8 64.0 32.5
‘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
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 1,066 36.2 3.8 60.0 -32.4 51.6 1.1 47.3 -50.5
Q1:2023-24           47.5 1.7 50.8 -45.8
‘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
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 1,066 64.5 5.4 30.2 -59.1 63.4 2.4 34.2 -60.9
Q1:2023-24           62.6 1.7 35.8 -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
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 1,066 23.1 1.9 75.0 -21.2 39.3 0.6 60.0 -38.7
Q1:2023-24           45.2 0.9 53.9 -44.3
‘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
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 1,066 21.6 11.8 66.6 9.7 43.2 3.6 53.1 39.6
Q1:2023-24           34.0 5.6 60.4 28.4
‘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
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 1,066 16.2 21.6 62.1 -5.4 41.0 8.1 50.9 32.9
Q1:2023-24           30.5 11.4 58.1 19.1
‘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
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 1,066 45.9 11.4 42.7 34.4 66.9 3.7 29.4 63.1
Q1:2023-24           62.4 4.0 33.6 58.3
‘Better’ Overall Business Situation is optimistic.

Table 23: Business Sentiments
Quarter Business Assessment Index (BAI) Business Expectations Index (BEI)
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
Q4:2022-23 112.2 132.9
Q1:2023-24   126.4

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 February 08, 2023.

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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