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Date : Oct 05, 2018
Industrial Outlook Survey of the Manufacturing Sector for Q2:2018-19 (Revised)

Today, the Reserve Bank released the results of the 83rd round of the Industrial Outlook Survey (IOS) conducted in July-September 2018. The Survey captures qualitative assessments of the business environment by companies in India’s manufacturing sector for Q2:2018-19 and their expectations for Q3:2018-191. Responses were received from 1095 companies in this round of the survey.

Highlights:

  • Respondents were more optimistic on demand conditions in Q2:2018-19 than in Q1:2018-19, as revealed in their assessment of production, order books, capacity utilisation and exports.

  • Optimism about the overall financial situation ebbed slightly, presumably reflecting shortfalls in internal accruals; however, the availability of finance from banks and other sources remained stable.

  • While sentiments on selling price remained unchanged, profit margins deteriorated due to higher input (raw material) prices and rising cost of finance.

  • Overall, business sentiment in the Indian manufacturing sector improved, as reflected in an increase in the Business Expectations Index (BEI)2 from 108.4 in Q1:2018-19 to 110.0 in Q2:2018-19.

  • As regards their expectations for Q3: 2018-19, respondents were less optimistic on the outlook on demand conditions.

  • Their sentiments on the overall financial situation deteriorated due to some lose of optimism on availability of finance from banks and other sources; however, respondents were more optimistic about availability of finance from overseas.

  • The outlook on selling prices has improved; however, profit margins are expected to remain unchanged.

  • The BEI improved from 114.1 in Q2:2018-19 to 115.0 in Q3:2018-19.

Summary Table
Net responses3
(per cent)
Parameters Assessment period Expectation period
Q1:2018-19 Q2:2018-19 Q2:2018-19 Q3:2018-19
Production 25.4 26.0 33.2 32.5
Order Books 22.7 24.5 27.7 28.9
Pending Orders 7.3 6.0 4.4 3.6
Capacity Utilisation 12.0 12.5 21.6 21.0
Exports 9.1 10.7 18.5 15.9
Imports 11.2 9.8 13.3 12.2
Employment 10.9 8.4 12.9 12.9
Financial Situation (Overall) 20.7 18.6 27.9 26.9
Availability of Finance (from internal accruals) 16.0 14.1 18.6 18.2
Availability of Finance (from banks and other sources) 11.7 12.2 14.3 13.1
Availability of Finance (from overseas, if applicable) 1.4 4.9 4.4 5.2
Cost of Finance -19.9 -19.3 -19.3 -19.8
Cost of Raw Material -53.0 -52.9 -43.4 -44.5
Selling Price 11.5 11.3 8.8 14.3
Profit Margin -10.3 -12.2 0.0 0.1
Overall Business Situation 29.6 27.9 34.6 36.3
Salary 40.0 33.5 31.6 24.4
Note: Please see the excel file for time series data

Table 1: Assessment and Expectations for Production
(Percentage responses)@
Quarter Total response Assessment Expectation
Increase Decrease No change Net response# Increase Decrease No change Net response#
Q2:2017-18 1141 34.9 18.5 46.6 16.4 42.2 12.0 45.8 30.2
Q3:2017-18 1299 36.8 14.7 48.5 22.0 43.4 9.1 47.5 34.3
Q4:2017-18 1250 40.7 13.4 45.9 27.3 42.5 8.4 49.2 34.1
Q1:2018-19 1207 39.4 14.0 46.6 25.4 40.4 11.0 48.6 29.5
Q2:2018-19 1095 39.2 13.1 47.7 26.0 43.0 9.8 47.2 33.2
Q3:2018-19           41.6 9.0 49.4 32.5
‘Increase’ in production is optimistic.
@:Due to rounding off percentage may not add up to 100.
#: 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 and Expectations for Order Books
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 31.8 19.7 48.5 12.1 39.7 11.7 48.6 28.0
Q3:2017-18 1299 35.4 16.2 48.4 19.2 39.6 9.6 50.8 29.9
Q4:2017-18 1250 38.9 14.4 46.6 24.5 40.5 10.2 49.2 30.3
Q1:2018-19 1207 36.2 13.5 50.3 22.7 38.8 10.4 50.8 28.4
Q2:2018-19 1095 37.3 12.8 49.9 24.5 38.4 10.8 50.8 27.7
Q3:2018-19           39.6 9.6 51.8 28.9
‘Increase’ in order books is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 3: Assessment and Expectations for Pending Orders
(Percentage responses)
Quarter Total response Assessment Expectation
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q2:2017-18 1141 4.2 17.9 77.9 13.7 6.5 12.5 81.0 6.0
Q3:2017-18 1299 6.7 16.2 77.1 9.5 4.7 11.4 83.9 6.7
Q4:2017-18 1250 4.5 14.8 80.7 10.3 6.8 12.5 80.7 5.7
Q1:2018-19 1207 5.1 12.4 82.4 7.3 4.9 12.6 82.5 7.6
Q2:2018-19 1095 7.2 13.2 79.7 6.0 6.3 10.7 83.0 4.4
Q3:2018-19           7.4 11.0 81.6 3.6
Pending orders ‘Below Normal’ is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 4: Assessment and Expectations for Capacity Utilisation (Main Product)
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 22.9 15.8 61.3 7.1 27.6 11.3 61.1 16.3
Q3:2017-18 1299 23.9 12.7 63.4 11.3 28.8 8.0 63.2 20.8
Q4:2017-18 1250 27.4 12.6 60.0 14.8 28.4 8.9 62.7 19.5
Q1:2018-19 1207 24.5 12.5 63.0 12.0 27.8 9.8 62.4 17.9
Q2:2018-19 1095 24.4 11.9 63.6 12.5 29.3 7.7 63.0 21.6
Q3:2018-19           28.3 7.3 64.4 21.0
‘Increase’ in capacity utilisation is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 5: Assessment and Expectations for Level of CU (compared to the average in last 4 quarters)
(Percentage responses)
Quarter Total response Assessment Expectation
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q2:2017-18 1141 9.7 15.6 74.7 -6.0 9.7 10.8 79.5 -1.1
Q3:2017-18 1299 10.3 14.1 75.6 -3.8 11.4 9.6 79.0 1.8
Q4:2017-18 1250 12.6 13.5 73.9 -0.9 13.0 10.7 76.2 2.3
Q1:2018-19 1207 11.0 12.9 76.1 -2.0 13.0 10.6 76.5 2.4
Q2:2018-19 1095 11.7 12.3 76.0 -0.6 11.8 9.3 78.9 2.5
Q3:2018-19           12.5 9.1 78.4 3.4
‘Above Normal’ in Level of capacity utilisation is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 6: Assessment and Expectations for Assessment of Production Capacity (with regard to expected demand in next 6 months)
(Percentage responses)
Quarter Total response Assessment Expectation
More than adequate Less than adequate Adequate Net response More than adequate Less than adequate Adequate Net response
Q2:2017-18 1141 10.4 7.4 82.2 3.0 12.2 6.6 81.2 5.6
Q3:2017-18 1299 11.8 7.1 81.2 4.7 11.1 6.5 82.4 4.6
Q4:2017-18 1250 12.2 6.3 81.4 5.9 12.9 6.9 80.2 6.0
Q1:2018-19 1207 10.5 6.6 82.9 3.9 13.0 6.0 81.0 7.0
Q2:2018-19 1095 11.2 7.2 81.6 4.0 11.3 6.0 82.7 5.2
Q3:2018-19           11.9 6.3 81.8 5.6
‘More than adequate’ in Assessment of Production Capacity is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 7: Assessment and Expectations for Exports
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 24.2 15.4 60.4 8.8 27.9 11.6 60.5 16.3
Q3:2017-18 1299 22.5 14.7 62.8 7.8 27.6 8.6 63.8 19.0
Q4:2017-18 1250 26.3 13.8 59.9 12.5 25.4 8.8 65.8 16.6
Q1:2018-19 1207 23.6 14.5 61.8 9.1 28.4 9.8 61.8 18.6
Q2:2018-19 1095 23.7 13.1 63.2 10.7 27.8 9.2 63.0 18.5
Q3:2018-19           26.1 10.2 63.7 15.9
‘Increase’ in exports is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 8: Assessment and Expectations for Imports
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 17.1 8.2 74.7 8.9 18.6 7.9 73.5 10.7
Q3:2017-18 1299 18.2 9.1 72.7 9.1 17.8 5.0 77.2 12.8
Q4:2017-18 1250 19.8 8.7 71.5 11.0 19.7 6.2 74.1 13.5
Q1:2018-19 1207 19.6 8.4 72.0 11.2 19.6 5.8 74.7 13.8
Q2:2018-19 1095 18.3 8.6 73.1 9.8 19.1 5.8 75.1 13.3
Q3:2018-19           19.3 7.1 73.6 12.2
‘Increase’ in imports is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 9: Assessment and Expectations for level of Raw Materials Inventory
(Percentage responses)
Quarter Total response Assessment Expectation
Above average Below average Average Net response Above average Below average Average Net response
Q2:2017-18 1141 13.1 6.2 80.8 -6.9 10.7 6.1 83.2 -4.6
Q3:2017-18 1299 14.6 6.0 79.4 -8.6 10.4 4.3 85.4 -6.1
Q4:2017-18 1250 14.0 5.9 80.2 -8.1 11.5 6.0 82.5 -5.5
Q1:2018-19 1207 14.6 4.9 80.5 -9.6 10.8 5.7 83.5 -5.2
Q2:2018-19 1095 14.3 6.1 79.6 -8.2 11.0 5.2 83.7 -5.8
Q3:2018-19           11.3 4.6 84.1 -6.7
‘Below average’ Inventory of raw materials is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 10: Assessment and Expectations for level of Finished Goods Inventory
(Percentage responses)
Quarter Total response Assessment Expectation
Above average Below average Average Net response Above average Below average Average Net response
Q2:2017-18 1141 15.9 7.1 77.0 -8.8 11.6 6.0 82.4 -5.6
Q3:2017-18 1299 14.5 6.9 78.6 -7.6 10.0 6.2 83.8 -3.8
Q4:2017-18 1250 13.3 6.5 80.3 -6.8 10.9 6.5 82.6 -4.5
Q1:2018-19 1207 12.0 6.3 81.7 -5.7 10.4 5.8 83.9 -4.6
Q2:2018-19 1095 13.3 6.5 80.2 -6.9 9.9 5.0 85.1 -4.8
Q3:2018-19           10.8 5.2 83.9 -5.6
‘Below average’ Inventory of finished goods is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 11: Assessment and Expectations for Employment Outlook
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 15.5 8.2 76.3 7.3 15.2 6.5 78.3 8.7
Q3:2017-18 1299 15.8 7.4 76.8 8.4 15.8 5.3 78.9 10.4
Q4:2017-18 1250 17.5 8.1 74.4 9.4 17.0 5.3 77.7 11.7
Q1:2018-19 1207 18.1 7.2 74.6 10.9 17.7 6.6 75.7 11.1
Q2:2018-19 1095 16.2 7.8 76.1 8.4 17.6 4.7 77.7 12.9
Q3:2018-19           17.1 4.2 78.7 12.9
‘Increase’ in employment is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 12: Assessment and Expectations for Overall Financial Situation
(Percentage responses)
Quarter Total response Assessment Expectation
Better Worsen No change Net response Better Worsen No change Net response
Q2:2017-18 1141 29.0 13.2 57.7 15.8 35.6 7.7 56.6 27.9
Q3:2017-18 1299 28.6 11.4 60.0 17.1 35.3 6.6 58.1 28.7
Q4:2017-18 1250 31.9 9.5 58.6 22.4 35.2 6.6 58.2 28.6
Q1:2018-19 1207 31.0 10.3 58.7 20.7 34.5 6.5 59.0 28.0
Q2:2018-19 1095 30.0 11.3 58.7 18.6 35.1 7.2 57.6 27.9
Q3:2018-19           34.4 7.5 58.0 26.9
‘Better’ overall financial situation is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 13: Assessment and Expectations for Working Capital Finance Requirement
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 29.7 6.3 64.1 23.4 29.4 5.7 65.0 23.7
Q3:2017-18 1299 34.4 5.0 60.6 29.4 30.5 4.1 65.4 26.4
Q4:2017-18 1250 35.5 5.3 59.2 30.1 32.4 3.6 64.0 28.8
Q1:2018-19 1207 32.4 4.8 62.8 27.7 30.8 5.3 63.9 25.4
Q2:2018-19 1095 30.4 5.5 64.2 24.9 30.8 4.5 64.7 26.3
Q3:2018-19           30.6 4.0 65.4 26.6
‘Increase’ in working capital finance is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 14: Assessment and Expectations for Availability of Finance (from Internal Accruals)
(Percentage responses)
Quarter Total response Assessment Expectation
Improve Worsen No change Net response Improve Worsen No change Net response
Q2:2017-18 1141 23.2 9.5 67.3 13.7 26.8 6.4 66.9 20.4
Q3:2017-18 1299 22.2 8.4 69.3 13.8 25.8 5.6 68.6 20.2
Q4:2017-18 1250 23.7 8.9 67.4 14.7 26.6 5.2 68.2 21.4
Q1:2018-19 1207 24.2 8.2 67.5 16.0 25.1 6.9 67.9 18.2
Q2:2018-19 1095 24.3 10.2 65.5 14.1 25.1 6.5 68.3 18.6
Q3:2018-19           24.9 6.7 68.3 18.2
‘Improvement’ in availability of finance is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 15: Assessment and Expectations for Availability of Finance (from banks and other sources)
(Percentage responses)
Quarter Total response Assessment Expectation
Improve Worsen No change Net response Improve Worsen No change Net response
Q2:2017-18 1141 19.8 6.1 74.1 13.8 21.5 4.6 73.9 17.0
Q3:2017-18 1299 19.8 5.8 74.4 14.0 18.6 4.5 77.0 14.1
Q4:2017-18 1250 18.8 7.0 74.2 11.9 20.9 4.4 74.7 16.5
Q1:2018-19 1207 19.0 7.3 73.7 11.7 20.9 6.4 72.7 14.6
Q2:2018-19 1095 18.7 6.4 74.9 12.2 19.9 5.6 74.4 14.3
Q3:2018-19           19.0 5.9 75.1 13.1
‘Improvement’ in availability of finance is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 16: Assessment and Expectations for Availability of Finance (from overseas, if applicable)
(Percentage responses)
Quarter Total response Assessment Expectation
Improve Worsen No change Net response Improve Worsen No change Net response
Q2:2017-18 1141 8.0 3.0 89.0 5.0 10.9 3.9 85.2 7.0
Q3:2017-18 1299 7.9 3.9 88.1 4.0 7.2 3.0 89.8 4.1
Q4:2017-18 1250 8.0 4.6 87.4 3.4 9.2 2.6 88.2 6.6
Q1:2018-19 1207 7.1 5.7 87.1 1.4 8.6 4.3 87.1 4.3
Q2:2018-19 1095 9.0 4.0 87.0 4.9 9.0 4.6 86.4 4.4
Q3:2018-19           9.5 4.3 86.2 5.2
‘Improvement’ in availability of finance is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 17: Assessment and Expectations for Cost of Finance
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 14.5 14.0 71.6 -0.5 14.7 10.9 74.5 -3.8
Q3:2017-18 1299 14.5 11.6 73.9 -3.0 14.1 11.9 74.0 -2.2
Q4:2017-18 1250 18.1 7.9 74.0 -10.3 13.9 9.8 76.3 -4.1
Q1:2018-19 1207 25.3 5.4 69.2 -19.9 18.7 6.4 74.9 -12.2
Q2:2018-19 1095 25.7 6.4 67.9 -19.3 24.1 4.8 71.1 -19.3
Q3:2018-19           24.7 4.9 70.4 -19.8
‘Decrease’ in cost of finance is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 18: Assessment and Expectations for Cost of Raw Materials
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 46.8 5.0 48.2 -41.8 40.4 4.0 55.6 -36.5
Q3:2017-18 1299 47.9 5.2 46.8 -42.7 37.6 5.7 56.7 -31.9
Q4:2017-18 1250 52.8 3.3 43.9 -49.5 38.3 4.3 57.4 -34.0
Q1:2018-19 1207 55.9 2.8 41.3 -53.0 42.7 3.7 53.6 -39.0
Q2:2018-19 1095 55.5 2.6 41.8 -52.9 46.2 2.8 50.9 -43.4
Q3:2018-19           46.5 1.9 51.6 -44.5
‘Decrease’ in cost of raw materials is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 19: Assessment and Expectations for Selling Price
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 16.1 16.2 67.6 -0.1 18.9 11.0 70.2 7.9
Q3:2017-18 1299 17.7 13.2 69.0 4.5 17.5 10.6 71.9 7.0
Q4:2017-18 1250 19.3 12.6 68.1 6.7 17.4 9.5 73.2 7.9
Q1:2018-19 1207 23.0 11.4 65.6 11.5 19.2 8.9 71.9 10.4
Q2:2018-19 1095 22.1 10.7 67.2 11.3 18.5 9.6 71.9 8.8
Q3:2018-19           21.0 6.7 72.3 14.3
‘Increase’ in selling price is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 20: Assessment and Expectations for Profit Margin
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 14.5 28.5 57.1 -14.0 20.3 20.0 59.7 0.3
Q3:2017-18 1299 15.4 25.4 59.1 -10.0 19.6 17.8 62.5 1.8
Q4:2017-18 1250 16.2 26.1 57.7 -9.9 18.8 18.7 62.5 0.1
Q1:2018-19 1207 15.5 25.8 58.7 -10.3 18.0 18.7 63.3 -0.7
Q2:2018-19 1095 14.3 26.5 59.2 -12.2 18.0 18.0 64.0 0.0
Q3:2018-19           17.1 17.0 65.9 0.1
‘Increase’ in profit margin is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 21: Assessment and Expectations for Overall Business Situation
(Percentage responses)
Quarter Total response Assessment Expectation
Better Worsen No change Net response Better Worsen No change Net response
Q2:2017-18 1141 31.7 14.4 53.9 17.3 42.7 9.0 48.4 33.7
Q3:2017-18 1299 35.1 11.2 53.7 23.9 42.9 6.0 51.1 36.9
Q4:2017-18 1250 39.2 9.0 51.8 30.2 42.5 6.4 51.2 36.1
Q1:2018-19 1207 38.7 9.0 52.3 29.6 42.7 5.8 51.5 36.9
Q2:2018-19 1095 38.1 10.3 51.6 27.9 40.5 5.9 53.6 34.6
Q3:2018-19           43.3 7.0 49.8 36.3
‘Better’ Overall Business Situation is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 22: Assessment and Expectations for Salary/Other Remuneration
(Percentage responses)
Quarter Total response Assessment Expectation
Increase Decrease No change Net response Increase Decrease No change Net response
Q2:2017-18 1141 36.7 2.2 61.2 34.5 34.5 2.5 63.0 32.0
Q3:2017-18 1299 29.4 2.2 68.4 27.2 25.9 2.0 72.1 23.9
Q4:2017-18 1250 28.8 2.2 69.0 26.6 25.2 2.3 72.5 22.9
Q1:2018-19 1207 42.0 2.1 55.9 40.0 36.8 1.8 61.3 35.0
Q2:2018-19 1095 35.5 2.0 62.5 33.5 32.8 1.2 65.9 31.6
Q3:2018-19           25.6 1.2 73.2 24.4
‘Increase in Salary / other remuneration’ is optimistic. Footnotes ‘@’ and ‘#’ given in Table 1 are applicable here.

Table 23: Business Expectations Index (BEI)
Quarter BEI-Assessment Quarter BEI-Expectation Quarter
Q2:2017-18 103.7 113.3
Q3:2017-18 109.8 115.0
Q4:2017-18 112.4 115.8
Q1:2018-19 108.4 114.6
Q2:2018-19 110.0 114.1
Q3:2018-19   115.0

1 The survey responses are those of the respondents and are not necessarily shared by the Reserve Bank of India. The 82nd round (Q1:2018-19) survey results were released on August 1, 2018 on the RBI website.

2 The Business Expectations Index (BEI) is a composite indicator calculated as a weighted (share of GVA of different industry group) net response of nine business indicators. The nine indicators considered for the computation of the BEI 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. It gives a snapshot of the business outlook in every quarter. BEI takes values between 0 and 200, and 100 is the threshold separating expansion from contraction.

3 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.

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