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Date : Apr 04, 2019
Industrial Outlook Survey of the Manufacturing Sector for Q4:2018-19

Today, the Reserve Bank released the results of the 85th round of the Industrial Outlook Survey (IOS) conducted during January-March, 2019. The survey captures qualitative assessments of the business environment by companies in India’s manufacturing sector for Q4:2018-19 and their expectations for Q1:2019-201. Responses were received from 1,258 companies in this round of the survey.

Highlights:

  • Respondents assessed demand conditions in Q4:2018-19 to be broadly similar to those in the previous quarter, with a modest improvement in sentiments on production, employment and exports offset by deterioration in optimism on imports, while the assessment of order books remained unchanged.

  • Sentiments regarding the overall financial situation turned around, with improved availability of finance from internal accruals; however, respondents were less hopeful of easier availability of finance from banks.

  • Moderation in cost pressures, including cost of finance, cost of raw materials and salary expenses brought some respite to manufacturers reeling under stressed profit margins.

  • Overall business sentiment in the Indian manufacturing sector, as reflected by the Business Assessment Index (BAI)2 remained optimistic at 107.2 in Q4:2018-19.

Business Assessment Index
  • As regards expectations for Q1:2019-20, respondents anticipated softer expansion in demand, with prospect of employment holding up.

  • Sentiment on the overall financial situation remained optimistic on expectations of easier availability of finance from internal accruals.

  • Anticipating large increases in staff costs, manufacturers expressed muted optimism on profit margins in Q1:2019-20.

  • The Business Expectations Index (BEI) moderated from 116.2 in Q4:2018-19 to 113.5 in Q1:2019-20.

Summary Table
Net responses3
(per cent)
Parameters Assessment period Expectations period
Q3:2018-19 Q4:2018-19 Q4:2018-19 Q1:2019-20
Production 24.9 25.3 36.3 32.8
Order Books 19.5 19.5 32.5 29.9
Pending Orders 8.6 9.2 3.6 4.3
Capacity Utilisation 12.6 12.8 23.8 19.6
Exports 12.1 13.0 19.8 17.7
Imports 11.6 10.9 15.7 13.0
Employment 9.4 9.8 12.2 12.3
Financial Situation (Overall) 16.5 17.8 28.7 29.3
Availability of Finance (from internal accruals) 10.8 15.3 19.2 20.5
Availability of Finance (from banks and other sources) 11.2 10.8 16.0 14.2
Availability of Finance (from overseas, if applicable) 2.9 4.7 6.0 6.0
Cost of Finance -19.5 -15.7 -17.5 -14.4
Cost of Raw Materials -49.2 -41.9 -38.6 -33.7
Salary/ Other Remuneration -28.2 -26.7 -21.4 -32.9
Selling Price 6.2 4.4 12.3 11.0
Profit Margin -11.7 -9.3 2.0 0.8
Overall Business Situation 24.6 22.4 36.7 36.9
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
Q4:2017-18 1,250 40.7 13.4 45.9 27.3 42.5 8.4 49.7 34.1
Q1:2018-19 1,207 39.4 14.0 46.6 25.4 40.4 11.0 48.6 29.5
Q2:2018-19 1,095 39.2 13.1 47.7 26.0 43.0 9.8 47.2 33.2
Q3:2018-19 1,267 38.2 13.3 48.5 24.9 41.6 9.0 49.4 32.5
Q4:2018-19 1,258 40.2 14.9 44.9 25.3 43.5 7.2 49.3 36.3
Q1:2019-20           42.1 9.3 48.5 32.8
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 38.9 14.4 46.7 24.5 40.5 10.2 49.3 30.3
Q1:2018-19 1,207 36.2 13.5 50.3 22.7 38.8 10.4 50.8 28.4
Q2:2018-19 1,095 37.3 12.8 49.9 24.5 38.4 10.8 50.8 27.7
Q3:2018-19 1,267 35.3 15.8 48.9 19.5 38.6 9.6 51.8 28.9
Q4:2018-19 1,258 35.3 15.9 48.8 19.5 41.0 8.5 50.5 32.5
Q1:2019-20           38.5 8.6 52.8 29.9
‘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 Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q4:2017-18 1,250 4.5 14.8 80.7 10.3 6.8 12.5 80.7 5.7
Q1:2018-19 1,207 5.1 12.4 82.4 7.3 4.9 12.6 82.5 7.6
Q2:2018-19 1,095 7.2 13.2 79.7 6.0 6.3 10.7 83.0 4.4
Q3:2018-19 1,267 4.7 13.2 82.1 8.6 7.4 11.0 81.6 3.6
Q4:2018-19 1,258 5.1 14.3 80.6 9.2 6.3 9.9 83.8 3.6
Q1:2019-20           6.1 10.4 83.5 4.3
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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 27.4 12.6 60.0 14.8 28.4 8.9 62.7 19.5
Q1:2018-19 1,207 24.5 12.5 63.0 12.0 27.8 9.8 62.4 17.9
Q2:2018-19 1,095 24.4 11.9 63.6 12.5 29.3 7.7 63.0 21.6
Q3:2018-19 1,267 24.9 12.3 62.8 12.6 28.3 7.3 64.4 21.0
Q4:2018-19 1,258 26.2 13.3 60.5 12.8 30.3 6.5 63.1 23.8
Q1:2019-20           27.2 7.7 65.1 19.6
‘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 Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q4:2017-18 1,250 12.6 13.5 73.9 -0.9 13.0 10.7 76.3 2.3
Q1:2018-19 1,207 11.0 12.9 76.1 -2.0 13.0 10.6 76.5 2.4
Q2:2018-19 1,095 11.7 12.3 76.0 -0.6 11.8 9.3 78.9 2.5
Q3:2018-19 1,267 10.1 12.9 76.9 -2.8 12.5 9.1 78.4 3.4
Q4:2018-19 1,258 11.6 13.0 75.3 -1.4 12.7 8.6 78.7 4.1
Q1:2019-20           12.2 8.2 79.6 4.0
‘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 Expectations
More than adequate Less than adequate Adequate Net response More than adequate Less than adequate Adequate Net response
Q4:2017-18 1,250 12.2 6.3 81.5 5.9 12.9 6.9 80.2 6.0
Q1:2018-19 1,207 10.5 6.6 82.9 3.9 13.0 6.0 81.0 7.0
Q2:2018-19 1,095 11.2 7.2 81.6 4.0 11.3 6.0 82.7 5.2
Q3:2018-19 1,267 10.3 7.2 82.5 3.0 11.9 6.3 81.8 5.6
Q4:2018-19 1,258 11.2 7.4 81.4 3.8 10.6 6.1 83.3 4.5
Q1:2019-20           12.2 6.2 81.6 6.0
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 26.3 13.8 59.9 12.5 25.4 8.8 65.8 16.6
Q1:2018-19 1,207 23.6 14.5 61.8 9.1 28.4 9.8 61.8 18.6
Q2:2018-19 1,095 23.7 13.1 63.2 10.7 27.8 9.2 63.0 18.5
Q3:2018-19 1,267 25.1 13.0 61.9 12.1 26.1 10.2 63.7 15.9
Q4:2018-19 1,258 25.0 12.0 63.0 13.0 27.8 8.0 64.2 19.8
Q1:2019-20           25.7 8.0 66.2 17.7
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 19.8 8.7 71.5 11.0 19.7 6.2 74.1 13.5
Q1:2018-19 1,207 19.6 8.4 72.0 11.2 19.6 5.8 74.7 13.8
Q2:2018-19 1,095 18.3 8.6 73.1 9.8 19.1 5.8 75.1 13.3
Q3:2018-19 1,267 20.1 8.5 71.4 11.6 19.3 7.1 73.6 12.2
Q4:2018-19 1,258 19.7 8.7 71.6 10.9 21.0 5.3 73.7 15.7
Q1:2019-20           19.2 6.2 74.6 13.0
‘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 Expectations
Above average Below average Average Net response Above average Below average Average Net response
Q4:2017-18 1,250 14.0 5.9 80.2 -8.1 11.5 6.0 82.5 -5.5
Q1:2018-19 1,207 14.6 4.9 80.5 -9.6 10.8 5.7 83.5 -5.2
Q2:2018-19 1,095 14.3 6.1 79.6 -8.2 11.0 5.2 83.7 -5.8
Q3:2018-19 1,267 14.3 4.6 81.0 -9.7 11.3 4.6 84.1 -6.7
Q4:2018-19 1,258 14.9 5.5 79.6 -9.5 12.1 4.2 83.8 -7.9
Q1:2019-20           12.0 3.7 84.3 -8.3
‘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 Expectations
Above average Below average Average Net response Above average Below average Average Net response
Q4:2017-18 1,250 13.3 6.5 80.2 -6.8 10.9 6.5 82.6 -4.4
Q1:2018-19 1,207 12.0 6.3 81.7 -5.7 10.4 5.8 83.9 -4.6
Q2:2018-19 1,095 13.3 6.5 80.2 -6.9 9.9 5.0 85.1 -4.8
Q3:2018-19 1,267 15.0 4.9 80.1 -10.0 10.8 5.2 83.9 -5.6
Q4:2018-19 1,258 14.4 6.5 79.1 -7.9 11.1 4.6 84.3 -6.5
Q1:2019-20           10.5 4.9 84.6 -5.6
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 17.5 8.1 74.4 9.4 17.0 5.3 77.7 11.7
Q1:2018-19 1,207 18.1 7.2 74.6 10.9 17.7 6.6 75.7 11.1
Q2:2018-19 1,095 16.2 7.8 76.1 8.4 17.6 4.7 77.7 12.9
Q3:2018-19 1,267 16.1 6.7 77.1 9.4 17.1 4.2 78.7 12.9
Q4:2018-19 1,258 16.7 6.9 76.5 9.8 17.0 4.8 78.2 12.2
Q1:2019-20           17.1 4.8 78.1 12.3
‘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 Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q4:2017-18 1,250 31.9 9.5 58.6 22.4 35.2 6.6 58.2 28.6
Q1:2018-19 1,207 31.0 10.3 58.7 20.7 34.5 6.5 59.0 28.0
Q2:2018-19 1,095 30.0 11.3 58.7 18.6 35.1 7.2 57.6 27.9
Q3:2018-19 1,267 28.5 11.9 59.6 16.5 34.4 7.5 58.0 26.9
Q4:2018-19 1,258 29.3 11.4 59.3 17.8 35.2 6.5 58.3 28.7
Q1:2019-20           35.0 5.7 59.3 29.3
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 35.5 5.3 59.2 30.1 32.4 3.6 64.0 28.8
Q1:2018-19 1,207 32.4 4.8 62.8 27.7 30.8 5.3 63.9 25.4
Q2:2018-19 1,095 30.4 5.5 64.2 24.9 30.8 4.5 64.7 26.3
Q3:2018-19 1,267 30.5 5.6 63.9 24.9 30.6 4.0 65.4 26.6
Q4:2018-19 1,258 30.8 4.6 64.6 26.2 29.9 4.4 65.7 25.6
Q1:2019-20           29.6 4.1 66.3 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 Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2017-18 1,250 23.7 8.9 67.4 14.7 26.6 5.2 68.2 21.4
Q1:2018-19 1,207 24.2 8.2 67.5 16.0 25.1 6.9 67.9 18.2
Q2:2018-19 1,095 24.3 10.2 65.5 14.1 25.1 6.5 68.3 18.6
Q3:2018-19 1,267 21.2 10.4 68.4 10.8 24.9 6.7 68.3 18.2
Q4:2018-19 1,258 22.8 7.5 69.6 15.3 25.4 6.2 68.4 19.2
Q1:2019-20           25.5 5.0 69.5 20.5
‘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 Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2017-18 1,250 18.8 7.0 74.2 11.9 20.9 4.4 74.7 16.5
Q1:2018-19 1,207 19.0 7.3 73.7 11.7 20.9 6.4 72.7 14.6
Q2:2018-19 1,095 18.7 6.4 74.9 12.2 19.9 5.6 74.4 14.3
Q3:2018-19 1,267 17.2 6.0 76.8 11.2 19.0 5.9 75.1 13.1
Q4:2018-19 1,258 17.8 7.0 75.2 10.8 20.1 4.1 75.8 16.0
Q1:2019-20           19.3 5.0 75.7 14.2
‘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 Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2017-18 1,250 8.0 4.6 87.4 3.4 9.2 2.6 88.2 6.6
Q1:2018-19 1,207 7.1 5.7 87.1 1.4 8.6 4.3 87.1 4.3
Q2:2018-19 1,095 9.0 4.0 87.0 4.9 9.0 4.6 86.4 4.4
Q3:2018-19 1,267 6.9 4.0 89.1 2.9 9.5 4.3 86.2 5.2
Q4:2018-19 1,258 8.6 3.9 87.6 4.7 9.0 3.0 88.0 6.0
Q1:2019-20           9.5 3.5 87.0 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 Expectations
Decrease Increase No change Net response Decrease Increase No change Net response
Q4:2017-18 1,250 18.1 7.9 74.0 -10.3 13.9 9.8 76.3 -4.1
Q1:2018-19 1,207 25.3 5.4 69.2 -19.9 18.7 6.4 74.9 -12.2
Q2:2018-19 1,095 25.7 6.4 67.9 -19.3 24.1 4.8 71.1 -19.3
Q3:2018-19 1,267 24.9 5.4 69.7 -19.5 24.7 4.9 70.4 -19.8
Q4:2018-19 1,258 21.3 5.6 73.1 -15.7 22.3 4.8 73.0 -17.5
Q1:2019-20           20.2 5.8 74.0 -14.4
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 52.8 3.3 43.9 -49.5 38.3 4.3 57.4 -34.0
Q1:2018-19 1,207 55.9 2.8 41.3 -53.0 42.7 3.7 53.6 -39.0
Q2:2018-19 1,095 55.5 2.6 41.8 -52.9 46.2 2.8 50.9 -43.4
Q3:2018-19 1,267 53.1 3.9 43.1 -49.2 46.5 1.9 51.6 -44.5
Q4:2018-19 1,258 46.8 4.8 48.4 -41.9 42.1 3.5 54.3 -38.6
Q1:2019-20           37.2 3.5 59.2 -33.7
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 28.8 2.2 69.0 -26.6 25.2 2.3 72.5 -22.9
Q1:2018-19 1,207 42.0 2.1 55.9 -40.0 36.8 1.8 61.3 -35.0
Q2:2018-19 1,095 35.5 2.0 62.5 -33.5 32.8 1.2 65.9 -31.6
Q3:2018-19 1,267 29.8 1.6 68.6 -28.2 25.6 1.2 73.2 -24.4
Q4:2018-19 1,258 28.5 1.8 69.7 -26.7 22.8 1.4 75.8 -21.4
Q1:2019-20           34.0 1.1 64.9 -32.9
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 19.3 12.6 68.1 6.7 17.4 9.5 73.1 7.9
Q1:2018-19 1,207 23.0 11.4 65.6 11.5 19.2 8.9 71.9 10.4
Q2:2018-19 1,095 22.1 10.7 67.2 11.3 18.5 9.6 71.9 8.8
Q3:2018-19 1,267 19.9 13.7 66.4 6.2 21.0 6.7 72.3 14.3
Q4:2018-19 1,258 17.5 13.1 69.3 4.4 19.4 7.1 73.5 12.3
Q1:2019-20           19.5 8.5 72.0 11.0
‘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 Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2017-18 1,250 16.2 26.1 57.7 -9.9 18.8 18.7 62.5 0.1
Q1:2018-19 1,207 15.5 25.8 58.7 -10.3 18.0 18.7 63.3 -0.7
Q2:2018-19 1,095 14.3 26.3 59.2 -12.2 18.0 18.0 64.0 0.0
Q3:2018-19 1,267 16.1 27.8 56.1 -11.7 17.1 17.0 65.9 0.1
Q4:2018-19 1,258 16.2 25.5 58.3 -9.3 18.7 16.7 64.5 2.0
Q1:2019-20           17.8 17.0 65.1 0.8
‘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 Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q4:2017-18 1,250 39.2 9.0 51.8 30.2 42.5 6.4 51.2 36.1
Q1:2018-19 1,207 38.7 9.0 52.3 29.6 42.7 5.8 51.5 36.9
Q2:2018-19 1,095 38.1 10.3 51.6 27.9 40.5 5.9 53.6 34.6
Q3:2018-19 1,267 34.9 10.3 54.8 24.6 43.3 7.0 49.8 36.3
Q4:2018-19 1,258 33.9 11.5 54.7 22.4 43.2 6.5 50.3 36.7
Q1:2019-20           42.5 5.6 51.9 36.9
‘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)
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
Q4:2018-19 107.2 116.2
Q1:2019-20   113.5

1 The survey responses are those of the respondents and are not necessarily shared by the Reserve Bank of India. The survey results of 84th round (Q3:2018-19) were released on February 7, 2019 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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