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Date : Sep 29, 2015
Industrial Outlook Survey- Q2:2015-16 (Round 71)

The Industrial Outlook Survey conducted during July-September 2015, provides qualitative assessment of business situation of companies in the Indian manufacturing sector for Q2:2015-16 and their expectation for the ensuing quarter Q3:2015-16. The survey elicited response from 1,304 manufacturing companies.

Highlights:

Summary Table: Net response2 (NR in %) comparison over previous quarter
Indicator Assessment period Expectation period
Q1:2015-16 Q2:2015-16 Q2:2015-16 Q3:2015-16
Production 16.3 15.2 28.9 29.2
Order Books 13.2 11.4 25.8 25.5
Pending Orders 13.6 13.5 8.5 7.6
Capacity Utilisation 6.7 3.6 17.6 17.5
Exports 10.1 5.7 19.6 16.7
Imports 10.7 8.4 9.9 9.2
Employment 7.4 5.9 9.9 9.6
Overall Financial Situation 14.4 13.5 25.1 26.0
Cost of Finance -12.1 -11.4 -8.7 -7.6
Cost of Raw Material -35.9 -24.8 -32.9 -28.1
Selling price 3.1 -4.0 7.9 6.2
Profit Margin -14.2 -16.9 -1.6 -1.3
Business Situation 19.6 13.9 32.0 31.6
Salary 34.2 28.9 27.3 22.0
Inventory of raw material -7.7 -6.3 -6.0 -5.1
Inventory of finished goods -10.9 -10.6 -8.2 -5.3
Business Expectation Index3 104.8 102.4 113.1 113.4

Assessment Quarter (Q2:2015-16)

  • Lower level of optimism is observed in the major indicators such as selling price, exports, imports, profit margin, production, order books, capacity utilisation, employment, financial situation, availability of finance 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 (104.8 to 102.4).

Expectation Quarter (Q3:2015-16)

  • The outlook on business sentiments remained range bound in the third quarter of 2015-16.

  • This could be attributed to the reduced pessimism in inventory of raw material, inventory of finished goods along with the reduced optimism in exports. Also reduced pessimism is observed in cost of finance and cost of raw material.


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
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 1304 34.1 18.9 46.9 15.2 40.3 11.4 48.3 28.9
Q3:2015-16           40.5 11.3 48.2 29.2
‘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
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 1304 31.1 19.7 49.3 11.4 37.4 11.6 51.0 25.8
Q3:2015-16           37.4 11.9 50.8 25.5
‘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
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 1304 18.6 5.1 76.3 13.5 14.6 6.1 79.4 8.5
Q3:2015-16           14.1 6.5 79.4 7.6
Pending orders ‘Below Normal’ is optimistic.

Table 4: Assessment & Expectation for Capacity Utilisation
(Percentage responses)
Indicator Options Assessment Expectation
Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16 Q3:2015-16
Capacity Utilisation (CU)-(main product) Increase 23.8 22.4 23.5 23.3 21.7 29.5 28.2 27.5 27.7 27.8
No Change 59.5 60.1 61.2 60.0 60.2 60.9 61.6 63.7 62.1 62.0
Decrease 16.7 17.5 15.3 16.7 18.1 9.6 10.2 8.8 10.2 10.2
Net Response 7.1 4.9 8.2 6.7 3.6 19.9 18.1 18.7 17.6 17.5
Level of CU (compared to the average in last 4 quarters) Above normal 8.7 9.6 10.6 10.2 8.8 10.0 10.6 12.1 10.5 9.2
Normal 72.3 70.8 70.6 71.3 71.9 77.3 76.8 75.6 75.5 77.6
Below Normal 19.0 19.5 18.9 18.6 19.3 12.7 12.6 12.3 13.9 13.1
Net Response -10.3 -9.9 -8.3 -8.4 -10.5 -2.7 -2.0 -0.2 -3.4 -3.9
Assessment of Prod. Capacity (with regard to expected demand in next 6 months) More than adequate 13.3 14.0 14.7 15.1 14.1 13.0 12.7 13.9 15.8 14.4
Adequate 78.7 77.0 76.9 76.9 78.3 80.9 80.4 79.2 77.5 78.8
Less than adequate 8.0 9.0 8.5 8.0 7.7 6.1 6.9 6.9 6.8 6.8
Net Response 5.3 5.0 6.2 7.2 6.4 6.9 5.8 7.0 9.0 7.5
‘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
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 1304 23.5 17.8 58.7 5.7 27.5 8.0 64.5 19.6
Q3:2015-16           27.3 10.6 62.1 16.7
‘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
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 1304 18.8 10.4 70.7 8.4 18.0 8.1 73.9 9.9
Q3:2015-16           18.0 8.8 73.2 9.2
‘Increase’ in imports is optimistic.

Table 7: Assessment & Expectation for level of Inventory (Raw Material and Finished Goods)
(Percentage responses)
Indicator Options Assessment Expectation
Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16 Q3:2015-16
Inventory of raw material Below average 8.4 8.3 8.4 6.5 7.4 6.1 5.6 7.1 5.5 5.5
Average 79.4 79.7 77.5 79.3 78.9 84.0 84.6 83.0 83.0 83.9
Above average 12.3 12.0 14.1 14.2 13.7 9.9 9.8 10.0 11.5 10.6
Net Response -3.9 -3.6 -5.7 -7.7 -6.3 -3.8 -4.3 -2.9 -6.0 -5.1
Inventory of finished goods Below average 7.5 8.4 8.1 7.2 6.9 6.7 6.1 5.8 6.4 6.3
Average 76.7 75.6 73.8 74.7 75.6 82.6 83.1 80.9 78.9 82.1
Above average 15.8 16.0 18.2 18.1 17.5 10.8 10.8 13.4 14.6 11.6
Net Response -8.3 -7.6 -10.1 -10.9 -10.6 -4.1 -4.7 -7.6 -8.2 -5.3
Inventory of raw material and finished goods ‘Below average’ is optimistic.

Table 8: Assessment & Expectation for Employment Outlook
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
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 1304 15.2 9.3 75.5 5.9 16.5 6.6 76.8 9.9
Q3:2015-16           15.7 6.1 78.2 9.6
‘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
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 1304 27.5 14.0 58.6 13.5 34.2 9.1 56.7 25.1
Q3:2015-16           34.8 8.8 56.4 26.0
‘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
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 1304 30.2 6.0 63.8 24.2 29.6 4.7 65.7 25.0
Q3:2015-16           29.9 4.3 65.8 25.5
‘Increase’ in working capital finance is optimistic.

Table 11: Assessment & Expectation for Availability of Finance
(Percentage responses)
Indicator Options Assessment Expectation
Q2:2014-15 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16 Q3:2014-15 Q4:2014-15 Q1:2015-16 Q2:2015-16 Q3:2015-16
Availability of finance (from internal accruals) Improve 23.5 23.0 22.9 21.5 21.1 26.5 26.3 24.7 23.9 23.5
No Change 65.7 66.1 66.8 68.3 68.1 66.8 66.9 68.8 68.9 69.8
Worsen 11.1 10.9 10.3 10.1 10.8 6.8 6.8 6.6 7.2 6.7
Net Response 12.1 12.1 12.6 11.4 10.4 19.7 19.4 18.1 16.7 16.8
Availability of Finance(from banks & other sources) Improve 18.8 19.7 20.3 19.1 19.3 20.8 20.5 22.6 21.2 20.0
No Change 74.4 73.1 72.8 75.6 75.0 75.1 75.1 72.4 75.0 76.3
Worsen 6.8 7.3 6.9 5.4 5.7 4.2 4.4 4.9 3.8 3.8
Net Response 12.0 12.4 13.4 13.7 13.6 16.6 16.1 17.7 17.3 16.2
Availability of Finance (from overseas, if applicable) Improve 8.8 11.4 15.0 13.0 11.1 10.8 12.4 14.4 12.9 11.5
No Change 86.1 82.9 79.4 82.2 83.9 86.3 83.8 81.6 83.6 85.0
Worsen 5.1 5.7 5.6 4.8 5.0 2.9 3.8 4.0 3.5 3.5
Net Response 3.7 5.8 9.4 8.2 6.1 7.9 8.6 10.4 9.3 8.0
‘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
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 1304 9.4 20.8 69.7 -11.4 9.9 18.7 71.4 -8.7
Q3:2015-16           10.2 17.9 71.9 -7.6
‘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
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 1304 13.2 38.1 48.7 -24.8 5.2 38.1 56.6 -32.9
Q3:2015-16           7.1 35.2 57.7 -28.1
‘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
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 1304 15.8 19.8 64.4 -4.0 19.5 11.6 68.8 7.9
Q3:2015-16           18.3 12.2 69.5 6.2
‘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
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 1304 13.1 30.0 56.9 -16.9 18.5 20.0 61.5 -1.6
Q3:2015-16           18.4 19.7 61.9 -1.3
‘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
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 1304 30.2 16.3 53.6 13.9 40.3 8.2 51.5 32.0
Q3:2015-16           39.9 8.3 51.8 31.6
‘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
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 1304 31.7 2.8 65.6 28.9 30.0 2.7 67.3 27.3
Q3:2015-16           24.3 2.3 73.4 22.0
‘Increase in Salary / other remuneration’ is optimistic.

Table 18: Business Expectation Index (BEI)
Quarter BEI-Assessment Quarter BEI-Expectation Quarter
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
Q2:2015-16 102.4 113.1
Q3:2015-16   113.4

1 The 70th round (Q1:2015-16) survey results were released on August 4, 2015 on the RBI website. The survey results are those of the respondents and are not necessarily shared by the Reserve Bank of India.

2 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 ‘Optimism’, and D is the percentage response of ‘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 (details are indicated in the relevant tables).

3 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.


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