This annual article, second in the series, presents the
findings of Order Books, Inventories and Capacity
Utilisation Survey (OBICUS) conducted during October
2012 to September 2013 (covering 20th to 23rd rounds of
the survey). In the first three quarters between October
2012 and June 2013, all the parameters viz., new orders
growth, level of CU and finished goods (FG) inventory to
sales ratio reflected a weaker condition as compared to the
corresponding position a year ago. In the following July-
September 2013 quarter, some turnaround was observed
in all the above parameters. This was corroborated in the
improved sales position of the private manufacturing sector
during the quarter.
I. Introduction:
The Reserve Bank of India tracks several
macroeconomic variables to assess the aggregate
demand-supply position in the economy and formulates
its monetary policy stance accordingly. Data on sales
and profit margin of the manufacturing sector, an
important segment of the economy, are available as
part of the disclosures of such companies. However,
information relating to order books, level of capacity
utilisation and finished goods’ inventory level, which
are also reflective of incipient demand conditions, are
generally not disclosed by most of the companies. To
bridge this data gap, the Reserve Bank has been
conducting Order Books, Inventories and Capacity
Utilisation Survey (OBICUS) of Indian manufacturing
companies on a quarterly basis since 2008. Results of
the survey are now regularly disseminated on the RBI
website.
In the absence of a comprehensive Business
Register in Indian context, the sample for OBICUS is
purposive and the companies are selected so as to get
a good size-mix of industries. The survey schedule is
canvassed among a fixed panel of 2,500 manufacturing
companies sector which is common in many business
tendency surveys. However, responding to the survey
is voluntary and it has not been possible to obtain
responses from all the companies and in all the
quarters. The information collected in the survey
includes quantitative data on new orders received
during the reference quarter, backlog orders at the
beginning of the quarter, pending orders at the end of
the quarter, total inventories with breakup of work-in-progress
(WiP) and finished goods (FG) inventories at
the end of the quarter and item-wise production in
terms of quantity and value during the quarter vis-à-vis
the installed capacity from the targeted group. The level
of capacity utilization (CU) is estimated from the above
data.
In this article, position of order books, inventories
and capacity utilisation of Indian manufacturing
industry during October 2012 to September 2013 is
based on the data obtained in the latest round (Round
23) of the survey, which pertains to the survey quarter
Q2:2013-141. However, data for the same quarter from
previous survey rounds are also presented to gauge the
robustness of the analysis (Section III). The related data
tables are presented in Annex.
II. Findings of Survey
II.1 Order Books Growth
Average value of new orders of sample companies
was lower in Q3:2012-13 as compared with the position
in Q3:2011-12 but was marginally higher than that in
Q2:2012-13. For the next two quarters, new orders contracted both on year-on-year (y-o-y) and quarter-on-quarter
(q-o-q) basis. However, the position turned
around in Q2: 2013-14 when new orders grew both on
y-o-y and q-o-q basis (Chart 1, Table 1).
II.2 Capacity Utilisation
Capacity utilization level in the Indian
manufacturing industry moved in a lower trajectory
since 2012-13. During Q3:2012-13 to Q1:2013-14, CU
at the aggregate level was lower when compared with
the position in the corresponding quarter a year ago.
But, reflecting seasonal trend, CU recorded a high in
Q4:2012-13 and a low in Q1:2013-14. CU picked up in
the second quarter of 2013-14 and at 73.7 per cent, it
was marginally higher than the level observed in the
same quarter of the previous year (i.e., Q2:2012-13).
The movements in CU remained broadly in line with
the movements in the de-trended IIP for manufacturing
sector (Chart 2, Table 2).
A further disaggregated size-wise analysis of data
indicates that CU levels continued to be higher for larger
companies in all the quarters. Taking top 10 companies
from each industry-group (based on value of production
in the latest survey round), it is observed that CU level
for these group was higher by 25-30 percentage points than CU level of remaining companies (Chart 3,
Table 2).
Distribution of companies across various CU
ranges indicated that a large proportion of sample
companies operated with CU below 60 per cent and
their share rose marginally in the first half of 2013-14.
On the other hand, around 20 per cent of respondent
companies had CU levels of more than 90 per cent and the share reached a maximum in Q4:2012-13 (Chart 4,
Table 3).
II.3 Inventory to Sales Ratio
During the period under reference, the average
raw material (RM) inventory to sales ratio peaked at
30.6 per cent in Q3:2012-13 and declined thereafter to
26.3 per cent in Q2:2013-14. As compared to the levels
in the same quarter a year ago, RM inventory to sales ratio was slightly higher in all the quarters except in
Q2:2013-14. On the other hand, FG inventory to sales
ratio was at the lowest level in Q3:2012-13 and rose
gradually in the next two quarters. Following the trend
in other parameters, FG inventory to sales ratio also
dipped in Q2:2013-14 (Chart 5, Table 4).
III. Validation of results of different rounds of Surveys
(Round 20 to Round 23):
The estimated survey parameters undergo some
changes from one round to another due to changes in
the constituent sample of companies. However, the
above changes may not pose any problem as long as
the trend observed earlier is retained. It may also be
mentioned that the direction of changes in the key
parameters have more relevance rather than their
absolute values for the decision makers.
New orders growth (y-o-y) in Q3:2012-13 to
Q1:2013-14 reported in rounds 20 to 23 moved in a
reasonable range and its direction remained similar
(Table 5). It was, however, observed that new order
growth for Q2:2012-13 varied considerably among
different rounds, due to inclusion/exclusion of a few
big companies.
Movements of CU also remained consistent across
the survey rounds. Chart 6 exhibits the minimum and maximum values of CU for a given quarter, as estimated
through different rounds of survey along with its initial
estimate (derived in the survey quarter itself). It can
be observed that the estimates of CU in round 23 have
generally tended to be lower (Table 6).
Estimates of FG inventory to sales ratio for a
particular quarter remained quite range bound in
different rounds of the survey, except that results of
round 23 were relatively higher (Table 7). Overall, it is
observed that there were some variations in the key
parameters due to change in the constituent set of
companies but the broad trend remained similar.
IV. Concluding Observation
Demand conditions in the Indian manufacturing
sector during October 2012 to September 2013 remained
weak as assessed through new orders growth, level of
CU and FG inventory to sales ratio in the quarterly
OBICUS conducted by the Reserve Bank. This is in line
with lower economic growth at the aggregate level since
2012-13. For the three quarters between October 2012
and June 2013, all the above parameters were weaker
than the corresponding position a year ago. However,
some turnaround was observed in the July-September
2013 quarter. This was also corroborated in the results
of non-government non-financial listed companies in
the manufacturing sector as their sales growth (y-o-y)
improved in Q2 of 2013-14 after successive deceleration
since Q3 of 2011-12.
Annex - Data Tables
Table 1: Order Books (Q2: 2012-13 to Q2: 2013-14) – Based on Round 23 |
Quarter |
Amount in ` Billion |
Q-o-Q growth ( per cent) |
Y-o-Y growth (per cent) |
Avg Backlog
order (484) |
Avg New
Order book
(484) |
Avg Pending
order (484) |
Avg Backlog
order |
Avg New
Order book |
Avg Pending
order |
Avg Backlog
order |
Avg New
Order book |
Avg Pending
order |
Q2:2012-13 |
1.56 |
1.14 |
1.55 |
3.8 |
-4.0 |
-0.7 |
12.3 |
5.6 |
11.0 |
Q3:2012-13 |
1.55 |
1.16 |
1.53 |
-0.7 |
2.5 |
-0.9 |
11.2 |
-4.5 |
2.2 |
Q4:2012-13 |
1.53 |
1.15 |
1.42 |
-1.2 |
-1.4 |
-7.5 |
1.9 |
-8.5 |
-5.9 |
Q1:2013-14 |
1.41 |
1.14 |
1.45 |
-7.5 |
-0.3 |
2.0 |
-5.7 |
-3.3 |
-7.1 |
Q2:2013-14 |
1.45 |
1.18 |
1.49 |
2.2 |
3.0 |
2.8 |
-7.1 |
3.7 |
-3.9 |
Figures in brackets are number of companies reporting order books. |
Table 2: Capacity Utilisation & Index of Industrial Production (Manufacturing)
(Base: 2004-05=100) – Based on Round 23 |
Quarter |
IIP –Mfg (Qtly avg
Base 2004-05) |
De-trended Qtly
IIP-Mfg |
CU |
CU of large
Companies |
CU of residual
Companies |
Q2:2012-13 |
175.9 |
-7.4 |
73.3 |
83.1 |
56.5 |
Q3:2012-13 |
183.3 |
-1.3 |
74.2 |
83.4 |
58.2 |
Q4:2012-13 |
197.2 |
11.3 |
75.8 |
83.4 |
58.8 |
Q1:2013-14 |
174.8 |
-12.3 |
71.1 |
82.6 |
53.2 |
Q2:2013-14 |
177.9 |
-10.4 |
73.7 |
85.1 |
55.1 |
Table 3: Variation in CU across companies – Based on Round 23 |
CU Range per
Cent |
Per cent of Total Respondent Companies in |
Q2:2012-13 |
Q3:2012-13 |
Q4:2012-13 |
Q1:2013-14 |
Q2:2013-14 |
Above 90 |
21.8 |
20.8 |
24.3 |
17.7 |
21.8 |
80 to 90 |
13.6 |
13.9 |
12.5 |
12.3 |
10.9 |
70 to 80 |
14.1 |
13.3 |
13.8 |
15.3 |
12.9 |
60 to 70 |
13.6 |
13.6 |
11.6 |
14.3 |
14.2 |
Below 60 |
37.0 |
38.4 |
37.8 |
40.4 |
40.1 |
Table 4: Average Sales and Inventories and their ratios (Q2: 2012-13 to Q2: 2013-14) – Based on Round 23 |
Quarter |
Amount in ` Billion |
Ratio ( per cent) |
Avg Sales (979) |
Avg Total Inv (979) |
Avg FG Inv (979) |
Avg WiP Inv (979) |
Avg RM Inv |
Total Inv/Sales |
FG Inv/Sales |
RM Inv/Sales |
Q2:2012-13 |
4.10 |
2.36 |
0.85 |
0.37 |
1.13 |
57.5 |
20.8 |
27.7 |
Q3:2012-13 |
4.32 |
2.39 |
0.70 |
0.37 |
1.32 |
55.3 |
16.3 |
30.6 |
Q4:2012-13 |
4.31 |
2.36 |
0.81 |
0.35 |
1.19 |
54.7 |
18.9 |
27.6 |
Q1:2013-14 |
4.05 |
2.39 |
0.83 |
0.39 |
1.17 |
59.0 |
20.5 |
28.8 |
Q2:2013-14 |
4.59 |
2.51 |
0.88 |
0.43 |
1.21 |
54.8 |
19.2 |
26.3 |
FG: Finished Goods. WiP: Work in Progress RM: Raw Material
Figures in brackets are number of companies reporting inventory. |
Table 5: Order Books Y-o-Y growth – Round 20 to 23 |
Quarter |
Round-20 (504) |
Round-21 (436) |
Round-22 (451) |
Round-23 (484) |
Q3:2011-12 |
9.6 |
|
|
|
Q4:2011-12 |
7.5 |
7.3 |
|
|
Q1:2012-13 |
15.2 |
23.7 |
22.1 |
|
Q2:2012-13 |
0.0 |
0.7 |
7.8 |
5.6 |
Q3:2012-13 |
-2.4 |
-0.2 |
1.1 |
-4.5 |
Q4:2012-13 |
|
-5.3 |
-2.6 |
-8.5 |
Q1:2013-14 |
|
|
-3.9 |
-3.3 |
Q2:2013-14 |
|
|
|
3.7 |
Figures in brackets are number of companies reporting order books. |
Table 6: CU level – Round 20 to 23 |
Quarter |
Round-20 |
Round-21 |
Round-22 |
Round-23 |
Q3:2011-12 |
77.5 |
|
|
|
Q4:2011-12 |
79.3 |
78.4 |
|
|
Q1:2012-13 |
73.2 |
73.2 |
73.1 |
|
Q2:2012-13 |
75.0 |
75.2 |
74.8 |
73.3 |
Q3:2012-13 |
74.8 |
74.4 |
75.2 |
74.2 |
Q4:2012-13 |
|
75.7 |
76.9 |
75.8 |
Q1:2013-14 |
|
|
73.4 |
71.1 |
Q2:2013-14 |
|
|
|
73.7 |
Table 7: Finished Goods Inventory to Sales – Round 20 to 23 |
Quarter |
Round-20 |
Round-21 |
Round-22 |
Round-23 |
Q3:2011-12 |
19.5 |
|
|
|
Q4:2011-12 |
16.8 |
15.7 |
|
|
Q1:2012-13 |
18.5 |
18.1 |
17.9 |
|
Q2:2012-13 |
20.4 |
20.3 |
20.1 |
20.8 |
Q3:2012-13 |
15.7 |
15.6 |
15.6 |
16.3 |
Q4:2012-13 |
|
18.1 |
17.8 |
18.9 |
Q1:2013-14 |
|
|
19.6 |
20.5 |
Q2:2013-14 |
|
|
|
19.2 |
|