Overall Business Sentiments for Q2:2016-17 appear Optimistic based on IOS

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प्रकाशित तारीख ऑगस्ट 09, 2016

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Overall Business Sentiments for Q2:2016-17 appear Optimistic based on IOS

The 74th round of the Reserve Bank of India’s Industrial Outlook Survey (IOS) indicates optimistic business sentiments. This round of the survey was conducted during April-June 2016. The survey elicited response from 1,275 manufacturing companies. It provides qualitative assessment of business situation of companies in the Indian manufacturing sector for Q1:2016-17 and their expectations for the ensuing quarter Q2:2016-17. The 73rd round (Q4:2015-16) survey results were released on April 05, 2016 on the RBI website.

The survey results are those of the respondents and are not necessarily shared by the Reserve Bank of India.

Highlights:

Assessment for Q1:2016-17

The Survey indicates improvement in demand condition in Q1:2016-17 as compared with Q4:2015-16. Net percentage responses indicating higher production, order books, exports/imports and employment during the quarter went up.
Availability of finance was perceived to have slightly improved. However, sentiments on cost of finance and cost of raw material, to a greater extent, deteriorated. The pricing power of the corporates appeared to have improved.
Overall, the business sentiments of the Indian manufacturing sector, as inferred from the Business Expectation Index (BEI), was slightly more upbeat than the previous quarter.

Expectation for Q2: 2016-17

The outlook on business sentiments appears to be more optimistic for Q2:2016-17. The BEI rose from 110.9 (for Q1: 2016-17) to 112.9 (for Q2: 2016-17).
Optimism in business sentiments is expressed in all major parameters barring cost of raw material.

Summary Table Net response¹ (in %) comparison over previous quarter
Parameters	Assessment period		Expectation period
Parameters	Q4:2015-16	Q1:2016-17	Q1:2016-17	Q2:2016-17
Production	16.8	17.3	25.0	29.0
Order Books	12.1	15.6	21.2	27.3
Pending Orders	13.9	11.0	10.2	6.6
Capacity Utilisation	7.1	6.7	13.4	16.8
Exports	3.3	6.2	13.7	16.8
Imports	4.7	8.4	5.8	9.6
Employment	4.1	5.3	7.1	8.1
Financial Situation	14.3	16.0	24.8	26.9
Availability of Finance	12.4	13.5	19.5	20.1
Cost of Finance	-8.7	-9.8	-8.3	-7.5
Cost of Raw Material	-24.4	-34.0	-27.7	-31.5
Selling Price	-3.7	5.7	7.1	10.1
Profit Margin	-16.7	-12.8	-3.6	-0.2
Overall Business Situation	16.2	21.2	30.5	33.5
Salary	27.5	32.0	30.3	26.9
Business Expectation Index²	103.0	104.0	110.9	112.9

Table 1: Assessment & Expectation for Production
(Percentage responses)@
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response#	Increase	Decrease	No change	Net response
Q1:2015-16	1299	34.1	17.8	48.1	16.3	39.6	10.9	49.5	28.7
Q2:2015-16	1304	34.1	18.9	46.9	15.2	40.3	11.4	48.3	28.9
Q3:2015-16	1337	34.2	18.2	47.6	16.0	40.5	11.3	48.2	29.2
Q4:2015-16	1342	35.6	18.8	45.6	16.8	41.2	10.2	48.6	31.1
Q1:2016-17	1275	34.5	17.2	48.3	17.3	38.8	13.8	47.4	25.0
Q2:2016-17						40.2	11.2	48.6	29.0
‘Increase’ in production is optimistic. @: Due to rounding off percentage may not add up to 100. This is applicable for all the tables from 1 to 17. #: Net Response (NR) is the difference of percentage of the respondents reporting optimism and that reporting pessimism. The range is -100 to 100. Any value greater than zero indicates expansion and any value less than zero indicates contraction.

Table 2: Assessment & Expectation for Order Books
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response	Increase	Decrease	No change	Net response
Q1:2015-16	1299	30.8	17.7	51.5	13.2	37.8	10.5	51.7	27.3
Q2:2015-16	1304	31.1	19.7	49.3	11.4	37.4	11.6	51.0	25.8
Q3:2015-16	1337	30.4	18.8	50.8	11.5	37.4	11.9	50.8	25.5
Q4:2015-16	1342	31.8	19.7	48.5	12.1	39.7	10.6	49.8	29.1
Q1:2016-17	1275	32.1	16.5	51.3	15.6	35.5	14.3	50.3	21.2
Q2:2016-17						38.1	10.8	51.1	27.3
‘Increase’ in order books is optimistic.

Table 3: Assessment & Expectation for Pending Orders
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Below Normal	Above Normal	Normal	Net response	Below Normal	Above Normal	Normal	Net response
Q1:2015-16	1299	18.6	5.1	76.3	13.6	13.1	6.9	80.1	6.2
Q2:2015-16	1304	18.6	5.1	76.3	13.5	14.6	6.1	79.4	8.5
Q3:2015-16	1337	19.2	5.0	75.8	14.3	14.1	6.5	79.4	7.6
Q4:2015-16	1342	18.2	4.3	77.4	13.9	13.3	7.0	79.7	6.3
Q1:2016-17	1275	16.7	5.7	77.6	11.0	15.1	4.9	80.0	10.2
Q2:2016-17						12.9	6.3	80.8	6.6
Pending orders ‘Below Normal’ is optimistic.

Table 4: Assessment & Expectation for Capacity Utilisation
(Percentage responses)
Indicator	Options	Assessment					Expectation
Indicator	Options	Q1:2015-16	Q2:2015-16	Q3:2015-16	Q4:2015-16	Q1:2016-17	Q2:2015-16	Q3:2015-16	Q4:2015-16	Q1:2016-17	Q2:2016-17
Capacity Utilisation (CU)-(main product)	Increase	23.3	21.7	23.4	24.6	21.8	27.7	27.8	27.8	26.3	26.5
	No Change	60.0	60.2	60.4	57.9	63.1	62.1	62.0	63.5	60.8	63.9
	Decrease	16.7	18.1	16.3	17.5	15.1	10.2	10.2	8.7	12.9	9.7
	Net Response	6.7	3.6	7.1	7.1	6.7	17.6	17.5	19.1	13.4	16.8
Level of CU (compared to the average in last 4 quarters)	Above normal	10.2	8.8	8.7	9.8	10.9	10.5	9.2	9.4	9.8	10.3
	Normal	71.3	71.9	72.6	71.0	72.5	75.5	77.6	78.2	75.6	77.8
	Below Normal	18.6	19.3	18.6	19.2	16.6	13.9	13.1	12.4	14.6	11.9
	Net Response	-8.4	-10.5	-9.9	-9.4	-5.7	-3.4	-3.9	-3.0	-4.8	-1.6
Assessment of Prod. Capacity (with regard to expected demand in next 6 months)	More than adequate	15.1	14.1	14.3	13.9	14.6	15.8	14.4	14.5	13.8	13.6
	Adequate	76.9	78.3	77.2	77.7	76.8	77.5	78.8	78.5	79.1	78.8
	Less than adequate	8.0	7.7	8.5	8.5	8.6	6.8	6.8	7.0	7.1	7.6
	Net Response	7.2	6.4	5.8	5.4	6.0	9.0	7.5	7.5	6.7	6.0
‘Increase’ in capacity utilisation is optimistic.

Table 5: Assessment & Expectation for Exports
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response	Increase	Decrease	No change	Net response
Q1:2015-16	1299	24.1	14.0	62.0	10.1	27.6	8.1	64.3	19.5
Q2:2015-16	1304	23.5	17.8	58.7	5.7	27.5	8.0	64.5	19.6
Q3:2015-16	1337	23.3	17.7	59.0	5.7	27.3	10.6	62.1	16.7
Q4:2015-16	1342	22.1	18.8	59.1	3.3	26.9	10.0	63.1	16.9
Q1:2016-17	1275	21.5	15.3	63.1	6.2	25.7	12.0	62.3	13.7
Q2:2016-17						26.3	9.5	64.2	16.8
‘Increase’ in exports is optimistic.

Table 6: Assessment & Expectation for Imports
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response	Increase	Decrease	No change	Net response
Q1:2015-16	1299	19.8	9.1	71.0	10.7	20.3	7.9	71.8	12.4
Q2:2015-16	1304	18.8	10.4	70.7	8.4	18.0	8.1	73.9	9.9
Q3:2015-16	1337	17.2	11.1	71.8	6.1	18.0	8.8	73.2	9.2
Q4:2015-16	1342	17.6	12.9	69.4	4.7	16.4	8.6	75.0	7.7
Q1:2016-17	1275	18.1	9.7	72.3	8.4	16.7	10.9	72.4	5.8
Q2:2016-17						17.5	7.9	74.6	9.6
‘Increase’ in imports is optimistic.

Table 7: Assessment & Expectations for level of Inventory (Raw Material and Finished Goods)
(Percentage responses)
Indicator	Options	Assessment					Expectation
Indicator	Options	Q1:2015-16	Q2:2015-16	Q3:2015-16	Q4:2015-16	Q1:2016-17	Q2:2015-16	Q3:2015-16	Q4:2015-16	Q1:2016-17	Q2:2016-17
Inventory of raw material	Below average	6.5	7.4	6.5	7.0	6.0	5.5	5.5	5.3	5.9	5.8
	Average	79.3	78.9	81.4	80.5	81.7	83.0	83.9	84.8	84.4	83.5
	Above average	14.2	13.7	12.2	12.5	12.4	11.5	10.6	9.9	9.7	10.8
	Net Response	-7.7	-6.3	-5.7	-5.5	-6.4	-6.0	-5.1	-4.7	-3.8	-5.0
Inventory of finished goods	Below average	7.2	6.9	7.0	8.7	7.0	6.4	6.3	6.2	7.0	7.1
	Average	74.7	75.6	75.7	75.9	77.7	78.9	82.1	81.6	81.9	80.8
	Above average	18.1	17.5	17.4	15.4	15.3	14.6	11.6	12.1	11.1	12.1
	Net Response	-10.9	-10.6	-10.4	-6.7	-8.3	-8.2	-5.3	-5.9	-4.1	-5.0
Inventory of raw material and finished goods ‘Below average’ is optimistic.

Table 8: Assessment & Expectations for Employment Outlook
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response	Increase	Decrease	No change	Net response
Q1:2015-16	1299	16.7	9.3	74.0	7.4	15.8	7.0	77.2	8.8
Q2:2015-16	1304	15.2	9.3	75.5	5.9	16.5	6.6	76.8	9.9
Q3:2015-16	1337	15.3	9.4	75.3	5.8	15.7	6.1	78.2	9.6
Q4:2015-16	1342	14.2	10.1	75.7	4.1	15.3	6.7	78.0	8.6
Q1:2016-17	1275	15.0	9.7	75.3	5.3	15.1	8.0	76.9	7.1
Q2:2016-17						15.8	7.7	76.5	8.1
‘Increase’ in employment is optimistic.

Table 9: Assessment & Expectation for Overall Financial Situation
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Better	Worsen	No change	Net response	Better	Worsen	No change	Net response
Q1:2015-16	1299	27.9	13.2	59.1	14.4	34.3	8.0	57.7	26.3
Q2:2015-16	1304	27.5	14.0	58.6	13.5	34.2	9.1	56.7	25.1
Q3:2015-16	1337	26.2	12.9	60.9	13.2	34.8	8.8	56.4	26.0
Q4:2015-16	1342	26.6	12.3	61.0	14.3	33.3	8.5	58.2	24.7
Q1:2016-17	1275	27.9	11.9	60.1	16.0	33.1	8.3	58.6	24.8
Q2:2016-17						35.2	8.3	56.5	26.9
‘Better’ overall financial situation is optimistic.

Table 10: Assessment & Expectation for Working Capital Finance Requirement
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response	Increase	Decrease	No change	Net response
Q1:2015-16	1299	30.2	6.8	63.0	23.5	32.3	5.1	62.6	27.2
Q2:2015-16	1304	30.2	6.0	63.8	24.2	29.6	4.7	65.7	25.0
Q3:2015-16	1337	30.3	6.7	62.9	23.6	29.9	4.3	65.8	25.5
Q4:2015-16	1342	31.7	6.8	61.4	24.9	30.1	4.9	65.0	25.2
Q1:2016-17	1275	28.1	7.2	64.7	20.8	30.0	5.4	64.6	24.6
Q2:2016-17						29.7	5.6	64.7	24.1
‘Increase’ in working capital finance is optimistic.

Table 11: Assessment & Expectation for Availability of Finance
(Percentage responses)
Indicator	Options	Assessment					Expectation
Indicator	Options	Q1:2015-16	Q2:2015-16	Q3:2015-16	Q4:2015-16	Q1:2016-17	Q2:2015-16	Q3:2015-16	Q4:2015-16	Q1:20 16-17	Q2:20 16-17
Availability of finance (from internal accruals)	Improve	21.5	21.1	22.3	21.7	22.4	23.9	23.5	26.1	25.6	25.9
	No Change	68.3	68.1	68.3	69.0	68.6	68.9	69.8	67.8	68.3	68.3
	Worsen	10.1	10.8	9.4	9.3	8.9	7.2	6.7	6.1	6.1	5.8
	Net Response	11.4	10.4	12.9	12.4	13.5	16.7	16.8	20.0	19.5	20.1
Availability of Finance (from banks & other sources)	Improve	19.1	19.3	19.2	18.3	18.7	21.2	20.0	20.6	21.6	21.7
	No Change	75.6	75.0	74.4	74.2	73.6	75.0	76.3	74.7	73.2	72.7
	Worsen	5.4	5.7	6.3	7.5	7.7	3.8	3.8	4.7	5.2	5.5
	Net Response	13.7	13.6	12.9	10.8	11.0	17.3	16.2	16.0	16.4	16.2
Availability of Finance (from overseas, if applicable)	Improve	13.0	11.1	11.3	8.8	10.6	12.9	11.5	12.1	10.0	12.2
	No Change	82.2	83.9	83.5	85.3	84.4	83.6	85.0	84.1	85.4	84.1
	Worsen	4.8	5.0	5.2	5.9	5.0	3.5	3.5	3.9	4.7	3.8
	Net Response	8.2	6.1	6.2	2.9	5.6	9.3	8.0	8.2	5.3	8.4
‘Improvement’ in availability of finance is optimistic.

Table 12: Assessment & Expectation for Cost of Finance
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Decrease	Increase	No change	Net response	Decrease	Increase	No change	Net response
Q1:2015-16	1299	10.2	22.3	67.5	-12.1	8.8	21.8	69.4	-13.0
Q2:2015-16	1304	9.4	20.8	69.7	-11.4	9.9	18.7	71.4	-8.7
Q3:2015-16	1337	14.0	19.4	66.6	-5.4	10.2	17.9	71.9	-7.6
Q4:2015-16	1342	11.0	19.7	69.2	-8.7	10.5	15.9	73.6	-5.5
Q1:2016-17	1275	10.1	19.9	70.0	-9.8	8.8	17.1	74.1	-8.3
Q2:2016-17						9.9	17.4	72.6	-7.5
Decrease’ in cost of finance is optimistic.

Table 13: Assessment & Expectation for Cost of Raw Material
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Decrease	Increase	No change	Net response	Decrease	Increase	No change	Net response
Q1:2015-16	1299	8.6	44.5	46.9	-35.9	6.0	38.8	55.2	-32.8
Q2:2015-16	1304	13.2	38.1	48.7	-24.8	5.2	38.1	56.6	-32.9
Q3:2015-16	1337	12.4	38.7	48.9	-26.4	7.1	35.2	57.7	-28.1
Q4:2015-16	1342	13.3	37.7	49.0	-24.4	6.9	34.2	58.9	-27.3
Q1:2016-17	1275	7.5	41.5	51.0	-34.0	8.3	36.0	55.7	-27.7
Q2:2016-17						6.0	37.5	56.5	-31.5
‘Decrease’ in cost of raw material is optimistic.

Table 14: Assessment & Expectation for Selling Price
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response	Increase	Decrease	No change	Net response
Q1:2015-16	1299	18.3	15.2	66.5	3.1	19.1	8.8	72.1	10.3
Q2:2015-16	1304	15.8	19.8	64.4	-4.0	19.5	11.6	68.8	7.9
Q3:2015-16	1337	16.7	18.0	65.3	-1.4	18.3	12.2	69.5	6.2
Q4:2015-16	1342	15.9	19.6	64.5	-3.7	17.9	10.7	71.4	7.2
Q1:2016-17	1275	18.9	13.2	67.9	5.7	20.2	13.1	66.7	7.1
Q2:2016-17						19.8	9.7	70.5	10.1
‘Increase’ in selling price is optimistic.

Table 15: Assessment & Expectation for Profit Margin
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response	Increase	Decrease	No change	Net response
Q1:2015-16	1299	14.2	28.5	57.3	-14.2	18.8	19.3	61.9	-0.5
Q2:2015-16	1304	13.1	30.0	56.9	-16.9	18.5	20.0	61.5	-1.6
Q3:2015-16	1337	14.3	29.5	56.2	-15.3	18.4	19.7	61.9	-1.3
Q4:2015-16	1342	13.4	30.1	56.5	-16.7	18.1	20.1	61.8	-2.0
Q1:2016-17	1275	14.4	27.4	58.2	-12.8	18.5	22.1	59.4	-3.6
Q2:2016-17						19.1	19.3	61.6	-0.2
‘Increase’ in profit margin is optimistic.

Table 16: Assessment & Expectation for Overall Business Situation
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Better	Worsen	No change	Net response	Better	Worsen	No change	Net response
Q1:2015-16	1299	32.5	12.9	54.6	19.6	42.7	6.7	50.6	36.0
Q2:2015-16	1304	30.2	16.3	53.6	13.9	40.3	8.2	51.5	32.0
Q3:2015-16	1337	31.3	14.0	54.7	17.4	39.9	8.3	51.8	31.6
Q4:2015-16	1342	30.8	14.6	54.6	16.2	40.9	7.6	51.5	33.3
Q1:2016-17	1275	33.3	12.1	54.6	21.2	39.4	8.9	51.7	30.5
Q2:2016-17						41.2	7.7	51.1	33.5
‘Better’ Overall Business Situation is optimistic.

Table 17: Assessment & Expectation for Salary/Other Remuneration
(Percentage responses)
Quarter	Total response	Assessment				Expectation
Quarter	Total response	Increase	Decrease	No change	Net response	Increase	Decrease	No change	Net response
Q1:2015-16	1299	36.9	2.6	60.5	34.2	27.4	3.9	68.7	23.5
Q2:2015-16	1304	31.7	2.8	65.6	28.9	30.0	2.7	67.3	27.3
Q3:2015-16	1337	28.4	3.2	68.4	25.1	24.3	2.3	73.4	22.0
Q4:2015-16	1342	30.5	3.0	66.5	27.5	25.0	2.8	72.2	22.1
Q1:2016-17	1275	34.9	2.9	62.2	32.0	33.2	2.9	63.9	30.3
Q2:2016-17						30.0	3.1	66.9	26.9
‘Increase in Salary / other remuneration’ is optimistic.

Table 18: Business Expectation Index (BEI)
Quarter	BEI-Assessment Quarter	BEI-Expectation Quarter
Q1:2015-16	104.8	115.2
Q2:2015-16	102.4	113.1
Q3:2015-16	103.6	113.4
Q4:2015-16	103.0	114.2
Q1:2016-17	104.0	110.9
Q2:2016-17		112.9

¹ Net Response (NR) is the difference of 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 i.e., 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.

² The Business Expectation Index (BEI) is a composite indicator calculated as weighted (share of GVA of different industry group) net response of nine business indicators. The nine indicators considered for computation of BEI are: (1) overall business situation, (2) production, (3) order books, (4) inventory of raw material, (5) inventory of finished goods, (6) profit margin, (7) employment, (8) exports and (9) capacity utilisation. It gives a single snapshot of business outlook in every quarter. BEI lies between 0 to 200, and 100 is the threshold separating expansion from contraction.