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Date : Aug 04, 2015
Industrial Outlook Survey- Q1: 2015-16 (Round 70)

The Industrial Outlook Survey conducted during April-June 2015, provides qualitative assessment of business situation of companies in the Indian manufacturing sector for Q1:2015-16 and their expectations for the ensuing quarter Q2:2015-16. The survey elicited response from 1,299 manufacturing companies.

Highlights:

Summary Table: Net response2 (NR in %) comparison over previous quarter
Parameters Assessment period Expectation period
Q4:2014-15 Q1:2015-16 Q1:2015-16 Q2:2015-16
Production 21.7 16.3 28.7 28.9
Order Books 16.3 13.2 27.3 25.8
Pending Orders 10.8 13.6 6.2 8.5
Capacity Utilisation 8.2 6.7 18.7 17.6
Exports 10.1 10.1 19.5 19.6
Imports 9.4 10.7 12.4 9.9
Employment 8.4 7.4 8.8 9.9
Financial Situation 14.9 14.4 26.3 25.1
Availability of Finance 12.6 11.4 18.1 16.7
Cost of Finance -17.7 -12.1 -13.0 -8.7
Cost of Raw Material -32.8 -35.9 -32.8 -32.9
Selling price 2.6 3.1 10.3 7.9
Profit Margin -12.5 -14.2 -0.5 -1.6
Business Situation 21.2 19.6 36.0 32.0
Salary 24.5 34.2 23.5 27.3
Business Expectation Index3 106.7 104.8 115.2 113.1

Assessment Quarter (Q1: 2015-16)

  • Lower level of optimism is observed in the major parameters such as production, order books, capacity utilisation, employment, financial situation, availability of finance along with increased pessimism in raw material cost and profit margin during the assessment quarter.

  • As a result, the business sentiments of the Indian manufacturing sector, as inferred from movements in Business Expectation Index (BEI), decreased in the assessment quarter (106.7 to 104.8).

Expectation Quarter (Q2: 2015-16)

  • The outlook on business sentiments weakened in Q2:2015-16 (115.2 to 113.1) from that of the previous quarter implying decrease in optimism.

  • This could be attributed to the reduced optimism in order books, capacity utilisation, imports, and overall business situation along with increased pessimism in profit margin.

Investment Intention during the year 2014-15 and 2015-16

  • An additional data block (Block 6) is annually canvassed in the April-June quarter for the purpose of getting an assessment of the investment intentions of the manufacturing companies in fixed capital, i.e. buildings, plants & machinery, etc. More than half of the companies (53 per cent) reported having made investment during the year 2014-15, of which 78 per cent companies planned for further investment in 2015-16. Among the manufacturing industries ‘basic metals & metal products’, ‘transport equipment’, ‘textiles’ and ‘food products’ industries expressed higher investment intentions for 2015-16. However, out of the 47 per cent companies who have not invested in FY: 2014-15, 10 per cent companies planned for investment in 2015-16.
Table 1: Assessment & Expectation for Production
(Percentage responses)@
Quarter Total response Assessment Expectation
Increase Decrease No change Net response# Increase Decrease No change Net response
Q1:2014-15 1293 34.4 17.2 48.4 17.2 39.2 12.2 48.6 27.1
Q2:2014-15 1225 35.2 16.7 48.1 18.5 43.4 9.7 46.8 33.7
Q3:2014-15 2088 34.9 19.3 45.9 15.6 43.6 9.8 47.3 34.5
Q4:2014-15 1565 37.2 15.5 47.3 21.7 42.6 10.3 47.0 32.3
Q1:2015-16 1299 34.1 17.8 48.1 16.3 39.6 10.9 49.5 28.7
Q2:2015-16           40.3 11.4 48.3 28.9
‘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
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2014-15 1293 31.8 15.4 52.9 16.4 36.2 11.5 52.3 24.6
Q2:2014-15 1225 31.2 15.8 53.0 15.4 38.2 9.1 52.6 29.1
Q3:2014-15 2088 30.5 19.0 50.5 11.6 40.0 8.4 51.6 31.6
Q4:2014-15 1565 32.3 16.0 51.7 16.3 38.6 9.8 51.6 28.7
Q1:2015-16 1299 30.8 17.7 51.5 13.2 37.8 10.5 51.7 27.3
Q2:2015-16           37.4 11.6 51.0 25.8
‘Increase’ in order books is optimistic.

Table 3: Assessment & Expectation for Pending Orders
(Percentage responses)
Quarter Total response Assessment Expectation
Below Normal Above Normal Normal Net response Below Normal Above Normal Normal Net response
Q1:2014-15 1293 15.6 5.1 79.3 10.5 14.0 5.8 80.1 8.2
Q2:2014-15 1225 16.8 4.2 79.1 12.6 12.3 5.7 82.0 6.5
Q3:2014-15 2088 18.3 4.4 77.3 13.9 11.8 5.2 83.1 6.6
Q4:2014-15 1565 17.7 6.9 75.3 10.8 12.4 5.3 82.4 7.1
Q1:2015-16 1299 18.6 5.1 76.3 13.6 13.1 6.9 80.1 6.2
Q2:2015-16           14.6 6.1 79.4 8.5
Pending orders ‘Below Normal’ is optimistic.

Table 4: Assessment & Expectation for Capacity Utilisation
(Percentage responses)
Parameter Options Assessment Expectation
Q1:20 14-15 Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16
Capacity Utilisation (CU)-(main product) Increase 22.3 23.8 22.4 23.5 23.3 29.5 29.5 28.2 27.5 27.7
No Change 61.3 59.5 60.1 61.2 60.0 60.4 60.9 61.6 63.7 62.1
Decrease 16.3 16.7 17.5 15.3 16.7 10.1 9.6 10.2 8.8 10.2
Net Response 6.0 7.1 4.9 8.2 6.7 19.4 19.9 18.1 18.7 17.6
Level of CU (compared to the average in last 4 quarters) Above normal 10.3 8.7 9.6 10.6 10.2 10.6 10.0 10.6 12.1 10.5
Normal 71.8 72.3 70.8 70.6 71.3 76.6 77.3 76.8 75.6 75.5
Below Normal 17.9 19.0 19.5 18.9 18.6 12.7 12.7 12.6 12.3 13.9
Net Response -7.6 -10.3 -9.9 -8.3 -8.4 -2.1 -2.7 -2.0 -0.2 -3.4
Assessment of Prod. Capacity (with regard to expected demand in next 6 months) More than adequate 13.8 13.3 14.0 14.7 15.1 12.9 13.0 12.7 13.9 15.8
Adequate 78.1 78.7 77.0 76.9 76.9 80.3 80.9 80.4 79.2 77.5
Less than adequate 8.1 8.0 9.0 8.5 8.0 6.8 6.1 6.9 6.9 6.8
Net Response 5.7 5.3 5.0 6.2 7.2 6.1 6.9 5.8 7.0 9.0
‘Increase’ in capacity utilisation is optimistic.

Table 5: Assessment & Expectation for Exports
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2014-15 1293 24.6 14.1 61.2 10.5 31.7 10.0 58.3 21.6
Q2:2014-15 1225 25.6 13.2 61.2 12.4 29.9 8.5 61.5 21.4
Q3:2014-15 2088 25.2 14.7 60.1 10.5 28.5 7.6 63.9 20.9
Q4:2014-15 1565 23.9 13.8 62.3 10.1 29.3 8.3 62.4 21.1
Q1:2015-16 1299 24.1 14.0 62.0 10.1 27.6 8.1 64.3 19.5
Q2:2015-16           27.5 8.0 64.5 19.6
‘Increase’ in exports is optimistic.

Table 6: Assessment & Expectation for Imports
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2014-15 1293 18.8 9.4 71.8 9.3 18.3 7.8 73.9 10.5
Q2:2014-15 1225 20.9 8.2 70.9 12.7 21.2 6.2 72.6 15.0
Q3:2014-15 2088 20.2 9.5 70.3 10.7 19.4 6.5 74.1 12.9
Q4:2014-15 1565 19.4 10.0 70.6 9.4 20.5 7.4 72.1 13.1
Q1:2015-16 1299 19.8 9.1 71.0 10.7 20.3 7.9 71.8 12.4
Q2:2015-16           18.0 8.1 73.9 9.9
‘Increase’ in imports is optimistic.

Table 7: Assessment & Expectations for level of Inventory (Raw Material and Finished Goods)
(Percentage responses)
Parameter Options Assessment Expectation
Q1:2014-15 Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16
Inventory of raw material Below average 7.2 8.4 8.3 8.4 6.5 6.4 6.1 5.6 7.1 5.5
Average 80.2 79.4 79.7 77.5 79.3 83.7 84.0 84.6 83.0 83.0
Above average 12.6 12.3 12.0 14.1 14.2 9.9 9.9 9.8 10.0 11.5
Net Response -5.4 -3.9 -3.6 -5.7 -7.7 -3.5 -3.8 -4.3 -2.9 -6.0
Inventory of finished goods Below average 6.7 7.5 8.4 8.1 7.2 6.4 6.7 6.1 5.8 6.4
Average 79.1 76.7 75.6 73.8 74.7 82.9 82.6 83.1 80.9 78.9
Above average 14.1 15.8 16.0 18.2 18.1 10.8 10.8 10.8 13.4 14.6
Net Response -7.4 -8.3 -7.6 -10.1 -10.9 -4.4 -4.1 -4.7 -7.6 -8.2
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
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2014-15 1293 15.0 9.6 75.4 5.4 15.7 8.4 75.9 7.2
Q2:2014-15 1225 14.6 8.3 77.1 6.3 15.2 6.2 78.6 8.9
Q3:2014-15 2088 15.2 9.4 75.4 5.8 16.6 5.4 78.0 11.2
Q4:2014-15 1565 17.0 8.6 74.4 8.4 15.6 6.7 77.7 9.0
Q1:2015-16 1299 16.7 9.3 74.0 7.4 15.8 7.0 77.2 8.8
Q2:2015-16           16.5 6.6 76.8 9.9
‘Increase’ in employment is optimistic.

Table 9: Assessment & Expectation for Overall Financial Situation
(Percentage responses)
Quarter Total response Assessment Expectation
Better Worsen No change Net response Better Worsen No change Net response
Q1:2014-15 1293 26.2 12.3 61.5 14.0 30.7 8.4 60.8 22.3
Q2:2014-15 1225 27.2 12.3 60.5 14.9 33.6 6.8 59.6 26.8
Q3:2014-15 2088 27.1 14.1 58.8 13.0 36.0 6.2 57.8 29.8
Q4:2014-15 1565 27.9 13.0 59.2 14.9 34.6 8.2 57.2 26.4
Q1:2015-16 1299 27.9 13.2 59.1 14.4 34.3 8.0 57.7 26.3
Q2:2015-16           34.2 9.1 56.7 25.1
‘Better’ overall financial situation is optimistic.

Table 10: Assessment & Expectation for Working Capital Finance Requirement
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2014-15 1293 31.6 6.6 61.7 25.0 33.1 5.0 61.9 28.1
Q2:2014-15 1225 30.5 6.0 63.5 24.5 33.5 5.0 61.5 28.5
Q3:2014-15 2088 33.8 6.6 59.7 27.2 31.7 4.8 63.5 26.9
Q4:2014-15 1565 34.2 6.6 59.2 27.6 32.9 5.0 62.1 27.9
Q1:2015-16 1299 30.2 6.8 63.0 23.5 32.3 5.1 62.6 27.2
Q2:2015-16           29.6 4.7 65.7 25.0
‘Increase’ in working capital finance is optimistic.

Table 11: Assessment & Expectation for Availability of Finance
(Percentage responses)
Parameter Options Assessment Expectation
Q1:2014-15 Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16
Availability of finance (from internal accruals) Improve 23.1 23.5 23.0 22.9 21.5 26.7 26.5 26.3 24.7 23.9
No Change 66.3 65.7 66.1 66.8 68.3 67.3 66.8 66.9 68.8 68.9
Worsen 10.6 11.1 10.9 10.3 10.1 6.1 6.8 6.8 6.6 7.2
Net Response 12.4 12.1 12.1 12.6 11.4 20.6 19.7 19.4 18.1 16.7
Availability of Finance(from banks & other sources) Improve 20.1 18.8 19.7 20.3 19.1 21.5 20.8 20.5 22.6 21.2
No Change 72.3 74.4 73.1 72.8 75.6 74.7 75.1 75.1 72.4 75.0
Worsen 7.6 6.8 7.3 6.9 5.4 3.8 4.2 4.4 4.9 3.8
Net Response 12.5 12.0 12.4 13.4 13.7 17.6 16.6 16.1 17.7 17.3
Availability of Finance (from overseas, if applicable) Improve 9.9 8.8 11.4 15.0 13.0 12.2 10.8 12.4 14.4 12.9
No Change 84.8 86.1 82.9 79.4 82.2 84.8 86.3 83.8 81.6 83.6
Worsen 5.3 5.1 5.7 5.6 4.8 3.0 2.9 3.8 4.0 3.5
Net Response 4.6 3.7 5.8 9.4 8.2 9.1 7.9 8.6 10.4 9.3
‘Improvement’ in availability of finance is optimistic.

Table 12: Assessment & Expectation for Cost of Finance
(Percentage responses)
Quarter Total response Assessment Expectation
Decrease Increase No change Net response Decrease Increase No change Net response
Q1:2014-15 1293 5.3 27.4 67.3 -22.2 5.4 27.7 66.9 -22.2
Q2:2014-15 1225 6.5 25.0 68.6 -18.5 6.0 23.2 70.8 -17.2
Q3:2014-15 2088 7.1 25.4 67.4 -18.3 5.6 22.8 71.6 -17.2
Q4:2014-15 1565 7.4 25.1 67.5 -17.7 7.4 21.8 70.8 -14.4
Q1:2015-16 1299 10.2 22.3 67.5 -12.1 8.8 21.8 69.4 -13.0
Q2:2015-16           9.9 18.7 71.4 -8.7
Decrease’ in cost of finance is optimistic.

Table 13: Assessment & Expectation for Cost of Raw Material
(Percentage responses)
Quarter Total response Assessment Expectation
Decrease Increase No change Net response Decrease Increase No change Net response
Q1:2014-15 1293 3.0 52.5 44.5 -49.5 2.9 49.7 47.4 -46.9
Q2:2014-15 1225 4.6 49.3 46.2 -44.7 3.7 45.8 50.6 -42.1
Q3:2014-15 2088 7.4 48.9 43.7 -41.5 4.3 43.5 52.2 -39.2
Q4:2014-15 1565 9.6 42.4 48.0 -32.8 4.9 41.2 53.9 -36.3
Q1:2015-16 1299 8.6 44.5 46.9 -35.9 6.0 38.8 55.2 -32.8
Q2:2015-16           5.2 38.1 56.6 -32.9
‘Decrease’ in cost of raw material is optimistic.

Table 14: Assessment & Expectation for Selling Price
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2014-15 1293 22.0 12.2 65.8 9.8 23.4 8.4 68.2 15.1
Q2:2014-15 1225 20.1 13.3 66.6 6.8 20.6 8.0 71.4 12.5
Q3:2014-15 2088 20.1 14.2 65.8 5.9 20.5 7.2 72.3 13.3
Q4:2014-15 1565 18.1 15.5 66.4 2.6 21.3 8.5 70.2 12.8
Q1:2015-16 1299 18.3 15.2 66.5 3.1 19.1 8.8 72.1 10.3
Q2:2015-16           19.5 11.6 68.8 7.9
‘Increase’ in selling price is optimistic.

Table 15: Assessment & Expectation for Profit Margin
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2014-15 1293 14.3 29.4 56.4 -15.1 16.8 22.2 61.0 -5.4
Q2:2014-15 1225 12.6 27.9 59.4 -15.3 18.0 20.3 61.7 -2.3
Q3:2014-15 2088 14.0 29.0 57.0 -15.1 18.9 17.9 63.2 1.0
Q4:2014-15 1565 15.4 27.9 56.7 -12.5 19.4 20.2 60.4 -0.8
Q1:2015-16 1299 14.2 28.5 57.3 -14.2 18.8 19.3 61.9 -0.5
Q2:2015-16           18.5 20.0 61.5 -1.6
‘Increase’ in profit margin is optimistic.

Table 16: Assessment & Expectation for Overall Business Situation
(Percentage responses)
Quarter Total response Assessment Expectation
Better Worsen No change Net response Better Worsen No change Net response
Q1:2014-15 1293 31.7 12.6 55.7 19.1 36.5 9.1 54.4 27.4
Q2:2014-15 1225 34.6 12.6 52.8 22.0 43.9 7.0 49.1 37.0
Q3:2014-15 2088 32.9 14.3 52.8 18.6 45.4 5.7 48.9 39.7
Q4:2014-15 1565 34.1 12.9 53.0 21.2 43.0 6.9 50.1 36.0
Q1:2015-16 1299 32.5 12.9 54.6 19.6 42.7 6.7 50.6 36.0
Q2:2015-16           40.3 8.2 51.5 32.0
‘Better’ Overall Business Situation is optimistic.

Table 17: Assessment & Expectation for Salary/Other Remuneration
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q1:2014-15 1293 38.5 3.1 58.4 35.4 31.8 2.8 65.4 28.9
Q2:2014-15 1225 32.5 3.0 64.4 29.5 30.2 2.1 67.7 28.1
Q3:2014-15 2088 25.3 5.7 69.0 19.6 24.0 2.4 73.6 21.6
Q4:2014-15 1565 28.1 3.6 68.3 24.5 21.5 5.9 72.6 15.6
Q1:2015-16 1299 36.9 2.6 60.5 34.2 27.4 3.9 68.7 23.5
Q2:2015-16           30.0 2.7 67.3 27.3
‘Increase in Salary / other remuneration’ is optimistic.

Table 18: Business Expectation Index (BEI)$
Quarter BEI-Assessment Quarter BEI-Expectation Quarter
Q1:2014-15 105.2 111.1
Q2:2014-15 106.3 114.7
Q3:2014-15 104.6 117.7
Q4:2014-15 106.7 115.6
Q1:2015-16 104.8 115.2
Q2:2015-16   113.1
$: The nine parameters 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.

Table 19: Investment in Fixed Capital
(Percentage responses)
Year Planned for the year Realised during the year
2010-11 64.9 71.1
2011-12 70.7 67.7
2012-13 64.4 66.8
2013-14 65.1 53.3
2014-15 49.1 52.6
2015-16 45.7 -

1The 69th round (Q4:2014-15) survey results were released on April 7, 2015 on the RBI website. The survey results are based on views of the respondents and are not necessarily shared by the Reserve Bank of India.

2Net Response (NR) is the difference of percentage of the respondents reporting optimism and that reporting pessimism. The range is -100 to100. 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’, 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.

3The Business Expectation Index (BEI) is a composite indicator calculated as weighted net response of nine business parameters. 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.


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