Today, the Reserve Bank released the results of 109th round of its quarterly industrial outlook survey (IOS). The survey¹ encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q4:2024-25 and their expectations for Q1:2025-26 as well as outlook on select parameters for the subsequent two quarters. In all, 1,310 companies responded in this round of the survey² conducted during January-March 2025.

Highlights:

A. Assessment for Q4:2024-25

• Manufacturers reported improved demand conditions as reflected in their assessment on production, order books, capacity utilisation, and exports (Table A).

• Pressures from input costs and staff cost increased during Q4:2024-25.

• Majority of the responding firms polled for no-change in selling prices and profit margins.

• Business assessment index (BAI) for the manufacturing sector improved in Q4:2024-25 (Chart 1).

B. Expectations for Q1:2025-26

• Manufacturers remained optimistic on demand conditions in Q1:2025-26; the optimism was, however, lower when compared to that in the previous quarter, which is partly seasonal.

• Pressures from input costs and finance cost are expected to ease in Q1:2025-26, while pressures from salary outgo are likely to increase.

• Respondents expect some moderation in growth of selling prices and profit margins, in sync with their expectations on demand conditions.

• Business expectations index stood firmly in growth terrain at 117.5 in Q1:2025-26 though it moderated from its level of 120.0 in Q4:2024-25 (Chart 1).

C. Expectations for Q2:2025-26 and Q3:2025-26

• Manufacturers perceive sequential improvement in production, order books, capacity utilisation and overall business situation during Q2 and Q3:2025-26 (Table B).

• Input cost pressures are expected to persist till end-2025 with rise in selling prices.

Note: Please see the excel file for time series data.

¹ The survey results reflect the respondents’ views, which are not necessarily shared by the Reserve Bank.

² Results of the previous survey round were released on the Bank’s website on February 07, 2025.

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.

⁴ 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.