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Date : Apr 07, 2021
Industrial Outlook Survey of the Manufacturing Sector for Q4:2020-21

Today, the Reserve Bank released the results of the 93rd round of the Industrial Outlook Survey (IOS) conducted during January-March 2021. The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q4:2020-21 and their expectations for Q1:2021-221. In all, 967 companies responded in this round of the survey. Owing to uncertainty driven by the COVID-19 pandemic, an additional block was included in this round of the survey for assessing the outlook on key parameters for two quarters ahead as well as three quarters ahead.

Highlights:

A. Assessment for Q4: 2020-21

  • Manufacturing companies assessed further strengthening of production, order books and employment during Q4:2020-21 (Table A).

  • Sentiments on financial situation improved in terms of availability of finance from banks, internal accruals and overseas sources.

  • Manufacturers perceived higher cost pressures mainly stemming from purchase of inputs and salary expenses and some increase in selling prices during the quarter.

  • The business assessment index (BAI)2 extended further in expansion zone to 113.1 in Q4:2020-21 from 108.6 in the previous quarter (Chart 1).

B. Expectations for Q1: 2021-22

  • Production volumes, new orders and job landscape are expected to strengthen in Q1:2021-22.

  • Optimism prevails on the overall financial situation.

  • Respondents expect more pressure from cost of finance, purchase of raw materials and salary outgo in Q1:2021-22.

  • Selling prices as well as profit margins are expected to increase in Q1:2021-22.

  • The business expectations index (BEI) increased further to 119.6 in Q1:2021-22 from 114.1 in Q4:2020-21 (Chart 1).

C. Expectations for Q2:2021-22 and Q3:2021-22

  • Manufacturers perceived further improvement in production and overall business situation in Q2:2021-22 and Q3:2021-22 (Table B).

  • Capacity utilisation and employment conditions are expected to improve.

  • Respondents expected input cost pressure to continue, albeit with marginal easing and selling prices to harden gradually.

Chart 1
Table A: Summary of Net responses3 on Survey Parameters
(per cent)
Parameters Assessment period Expectation period
Q3:2020-21 Q4:2020-21 Q4:2020-21 Q1:2021-22
Production 27.2 36.3 31.5 43.7
Order Books 20.5 33.1 27.3 43.2
Pending Orders 12.0 -3.0 9.2 -2.4
Capacity Utilisation 17.3 29.1 24.1 38.0
Inventory of Raw Materials -5.4 -11.1 -6.7 -11.8
Inventory of Finished Goods -4.6 -7.6 -6.3 -10.9
Exports 4.6 15.5 13.0 29.6
Imports 6.3 16.4 8.5 26.1
Employment 3.9 10.9 7.2 17.9
Financial Situation (Overall) 27.5 29.4 33.0 47.3
Availability of Finance (from internal accruals) 17.4 23.7 22.8 34.7
Availability of Finance (from banks & other sources) 14.9 16.5 15.3 25.6
Availability of Finance (from overseas, if applicable) 0.8 2.7 3.8 13.4
Cost of Finance 0.2 -3.4 -5.0 -13.9
Cost of Raw Material -51.6 -69.0 -42.7 -62.4
Salary/ Other Remuneration -14.0 -18.7 -16.0 -41.6
Selling Price 9.4 22.7 10.7 29.2
Profit Margin -11.8 2.0 -2.4 11.0
Overall Business Situation 32.9 36.5 40.7 52.5
Note: Please see the excel file for time series data.

Table B: Business Expectations of Select Parameters for extended period – Net response
(per cent)
Parameters Round 92 Round 93
Q4:2020-21 Q1:2021-22 Q2:2021-22 Q3:2021-22
Overall Business Situation 40.7 52.5 56.1 60.4
Production 31.5 43.7 52.7 58.3
Order Books 27.3 43.2 49.1 53.4
Capacity Utilisation 24.1 38.0 48.1 50.4
Employment 7.2 17.9 21.9 24.6
Cost of Raw Materials -42.7 -62.4 -61.8 -57.8
Selling Prices 10.7 29.2 31.7 31.8

Table 1: Assessment and Expectations for Production
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 33.6 19.8 46.6 13.8 35.4 18.2 46.4 17.2
Q1:2020-21 802 8.3 72.2 19.5 -63.9 37.8 14.1 48.1 23.7
Q2:2020-21 959 42.4 32.1 25.5 10.3 41.4 30.2 28.5 11.2
Q3:2020-21 1,011 46.6 19.4 34.0 27.2 43.4 16.9 39.7 26.4
Q4:2020-21 967 48.9 12.6 38.5 36.3 43.7 12.2 44.0 31.5
Q1:2021-22           53.3 9.7 37.0 43.7
‘Increase’ in production is optimistic.
Note: The sum of components may not add up to total due to rounding off (This is applicable for all tables).

Table 2: Assessment and Expectations for Order Books
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 30.1 20.1 49.9 10.0 33.6 17.0 49.3 16.6
Q1:2020-21 802 8.9 63.8 27.3 -54.9 33.5 15.1 51.4 18.4
Q2:2020-21 959 37.2 31.3 31.5 5.9 36.4 28.4 35.3 8.0
Q3:2020-21 1,011 40.3 19.8 40.0 20.5 39.2 18.6 42.2 20.6
Q4:2020-21 967 46.4 13.3 40.3 33.1 41.1 13.7 45.2 27.3
Q1:2021-22           51.0 7.8 41.1 43.2
‘Increase’ in order books is optimistic.

Table 3: Assessment and Expectations for Pending Orders
(Percentage responses)
Quarter Total response Assessment Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q4:2019-20 860 4.1 18.5 77.4 14.4 3.7 19.5 76.8 15.9
Q1:2020-21 802 6.1 47.3 46.6 41.2 4.6 16.2 79.1 11.6
Q2:2020-21 959 7.2 30.1 62.7 22.8 5.8 31.8 62.4 26.0
Q3:2020-21 1,011 7.2 19.2 73.6 12.0 7.4 21.5 71.1 14.2
Q4:2020-21 967 13.2 10.2 76.6 -3.0 5.6 14.8 79.7 9.2
Q1:2021-22           11.6 9.2 79.3 -2.4
Pending orders ‘Below Normal’ is optimistic.

Table 4: Assessment and Expectations for Capacity Utilisation (Main Product)
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 21.0 19.0 60.0 2.0 23.1 15.2 61.6 7.9
Q1:2020-21 802 6.0 67.6 26.3 -61.6 25.5 14.2 60.3 11.3
Q2:2020-21 959 31.8 30.2 37.9 1.6 36.2 28.6 35.2 7.6
Q3:2020-21 1,011 35.3 18.0 46.7 17.3 32.4 15.0 52.6 17.5
Q4:2020-21 967 40.6 11.5 47.9 29.1 34.7 10.6 54.7 24.1
Q1:2021-22           45.2 7.3 47.5 38.0
‘Increase’ in capacity utilisation is optimistic.

Table 5: Assessment and Expectations for Level of CU (compared to the average in last 4 quarters)
(Percentage responses)
Quarter Total response Assessment Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q4:2019-20 860 7.6 21.6 70.7 -14.0 7.9 18.5 73.6 -10.6
Q1:2020-21 802 2.7 63.6 33.7 -60.9 9.1 16.4 74.5 -7.3
Q2:2020-21 959 5.9 43.4 50.8 -37.5 5.8 39.2 55.0 -33.5
Q3:2020-21 1,011 11.3 23.2 65.5 -12.0 8.3 25.5 66.2 -17.2
Q4:2020-21 967 21.3 12.2 66.5 9.1 11.7 15.3 73.0 -3.6
Q1:2021-22           25.3 8.4 66.2 16.9
‘Above Normal’ in Level of capacity utilisation is optimistic.

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 Expectations
More than adequate Less than adequate Adequate Net response More than adequate Less than adequate Adequate Net response
Q4:2019-20 860 14.3 9.5 76.2 4.8 14.6 11.4 74.0 3.2
Q1:2020-21 802 19.0 24.5 56.5 -5.6 13.7 8.8 77.5 4.9
Q2:2020-21 959 15.9 17.2 66.9 -1.3 18.7 17.3 64.0 1.3
Q3:2020-21 1,011 14.1 11.2 74.6 2.9 15.9 12.3 71.8 3.5
Q4:2020-21 967 15.5 10.0 74.5 5.5 14.2 9.3 76.5 5.0
Q1:2021-22           20.2 7.3 72.5 12.9
‘More than adequate’ in Assessment of Production Capacity is optimistic.

Table 7: Assessment and Expectations for Exports
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 20.1 14.3 65.5 5.8 22.4 13.8 63.9 8.6
Q1:2020-21 802 8.7 50.4 40.9 -41.7 22.5 11.5 66.0 11.0
Q2:2020-21 959 25.3 25.9 48.8 -0.6 23.1 26.9 50.0 -3.8
Q3:2020-21 1,011 22.5 17.9 59.5 4.6 25.1 17.6 57.3 7.5
Q4:2020-21 967 31.6 16.0 52.4 15.5 25.1 12.1 62.7 13.0
Q1:2021-22           38.7 9.0 52.3 29.6
‘Increase’ in exports is optimistic.

Table 8: Assessment and Expectations for Imports
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 16.0 11.3 72.7 4.7 15.7 10.2 74.1 5.4
Q1:2020-21 802 7.6 40.5 51.8 -32.9 16.9 10.3 72.8 6.6
Q2:2020-21 959 18.4 21.2 60.5 -2.8 19.9 21.0 59.1 -1.0
Q3:2020-21 1,011 19.6 13.3 67.2 6.3 17.3 12.4 70.4 4.9
Q4:2020-21 967 25.8 9.3 64.9 16.4 17.7 9.1 73.2 8.5
Q1:2021-22           32.6 6.6 60.8 26.1
‘Increase’ in imports is optimistic.

Table 9: Assessment and Expectations for level of Raw Materials Inventory
(Percentage responses)
Quarter Total response Assessment Expectations
Above average Below average Average Net response Above average Below average Average Net response
Q4:2019-20 860 12.9 7.8 79.3 -5.1 10.6 7.0 82.4 -3.6
Q1:2020-21 802 21.3 13.5 65.2 -7.8 9.8 6.9 83.3 -2.9
Q2:2020-21 959 16.7 10.9 72.3 -5.8 15.5 9.7 74.8 -5.9
Q3:2020-21 1,011 13.1 7.7 79.3 -5.4 11.5 7.4 81.1 -4.2
Q4:2020-21 967 17.5 6.5 76.0 -11.1 12.0 5.3 82.8 -6.7
Q1:2021-22           17.2 5.4 77.4 -11.8
‘Below average’ Inventory of raw materials is optimistic.

Table 10: Assessment and Expectations for level of Finished Goods Inventory
(Percentage responses)
Quarter Total response Assessment Expectations
Above average Below average Average Net response Above average Below average Average Net response
Q4:2019-20 860 13.3 6.7 80.0 -6.5 12.9 6.2 80.9 -6.7
Q1:2020-21 802 27.0 14.3 58.7 -12.6 10.4 6.2 83.4 -4.3
Q2:2020-21 959 18.9 10.2 70.9 -8.7 17.2 9.5 73.3 -7.6
Q3:2020-21 1,011 12.8 8.1 79.1 -4.6 12.4 7.2 80.4 -5.3
Q4:2020-21 967 15.2 7.5 77.3 -7.6 11.5 5.1 83.4 -6.3
Q1:2021-22           16.4 5.5 78.1 -10.9
‘Below average’ Inventory of finished goods is optimistic.

Table 11: Assessment and Expectations for Employment
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 13.4 11.3 75.3 2.0 12.5 10.7 76.8 1.8
Q1:2020-21 802 3.9 32.5 63.7 -28.6 14.3 9.0 76.7 5.2
Q2:2020-21 959 11.8 21.0 67.2 -9.2 11.0 18.7 70.3 -7.7
Q3:2020-21 1,011 15.5 11.6 73.0 3.9 14.5 12.1 73.3 2.4
Q4:2020-21 967 19.4 8.5 72.1 10.9 14.6 7.3 78.1 7.2
Q1:2021-22           23.5 5.5 71.0 17.9
‘Increase’ in employment is optimistic.

Table 12: Assessment and Expectations for Overall Financial Situation
(Percentage responses)
Quarter Total response Assessment Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q4:2019-20 860 26.5 13.6 59.9 12.8 31.2 11.7 57.1 19.5
Q1:2020-21 802 8.7 57.6 33.6 -48.9 33.1 8.8 58.0 24.3
Q2:2020-21 959 31.8 23.9 44.3 7.8 34.6 23.2 42.2 11.4
Q3:2020-21 1,011 40.4 12.9 46.7 27.5 36.7 11.4 51.9 25.3
Q4:2020-21 967 43.0 13.6 43.4 29.4 39.2 6.2 54.6 33.0
Q1:2021-22           53.4 6.1 40.5 47.3
‘Better’ overall financial situation is optimistic.

Table 13: Assessment and Expectations for Working Capital Finance Requirement
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 28.3 6.4 65.4 21.9 27.3 5.7 66.9 21.6
Q1:2020-21 802 36.9 18.8 44.4 18.1 28.8 5.7 65.5 23.1
Q2:2020-21 959 33.3 11.4 55.3 21.9 37.2 11.5 51.3 25.7
Q3:2020-21 1,011 30.7 7.1 62.2 23.7 31.3 6.9 61.8 24.4
Q4:2020-21 967 30.8 7.7 61.4 23.1 28.5 3.7 67.8 24.8
Q1:2021-22           37.6 5.2 57.3 32.4
‘Increase’ in working capital finance is optimistic.

Table 14: Assessment and Expectations for Availability of Finance (from Internal Accruals)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2019-20 860 23.1 9.5 67.4 13.7 22.1 8.8 69.1 13.4
Q1:2020-21 802 7.2 38.0 54.8 -30.8 23.1 6.0 70.9 17.0
Q2:2020-21 959 22.2 18.4 59.5 3.8 22.5 16.1 61.3 6.4
Q3:2020-21 1,011 27.2 9.7 63.1 17.4 24.8 9.7 65.5 15.1
Q4:2020-21 967 33.3 9.6 57.1 23.7 28.3 5.6 66.1 22.8
Q1:2021-22           39.7 5.1 55.2 34.7
‘Improvement’ in availability of finance is optimistic.

Table 15: Assessment and Expectations for Availability of Finance (from banks and other sources)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2019-20 860 16.9 6.1 76.9 10.8 17.7 5.9 76.4 11.7
Q1:2020-21 802 12.9 15.8 71.3 -3.0 18.1 6.4 75.4 11.7
Q2:2020-21 959 20.3 8.3 71.4 12.0 20.4 9.8 69.8 10.6
Q3:2020-21 1,011 21.0 6.1 72.8 14.9 19.4 5.8 74.8 13.6
Q4:2020-21 967 23.1 6.6 70.3 16.5 19.6 4.3 76.1 15.3
Q1:2021-22           30.0 4.4 65.6 25.6
‘Improvement’ in availability of finance is optimistic.

Table 16: Assessment and Expectations for Availability of Finance (from overseas, if applicable)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2019-20 860 7.2 4.4 88.4 2.8 7.3 4.3 88.4 3.0
Q1:2020-21 802 3.2 13.5 83.3 -10.3 7.9 4.0 88.1 4.0
Q2:2020-21 959 6.8 7.4 85.7 -0.6 7.9 9.9 82.2 -2.0
Q3:2020-21 1,011 5.8 5.0 89.2 0.8 7.2 6.6 86.1 0.6
Q4:2020-21 967 7.5 4.8 87.7 2.7 7.2 3.4 89.3 3.8
Q1:2021-22           16.5 3.1 80.3 13.4
‘Improvement’ in availability of finance is optimistic.

Table 17: Assessment and Expectations for Cost of Finance
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 15.0 8.4 76.6 -6.6 15.0 7.1 77.9 -7.9
Q1:2020-21 802 16.3 15.9 67.8 -0.4 12.7 6.6 80.6 -6.1
Q2:2020-21 959 17.5 14.7 67.7 -2.8 17.6 10.9 71.5 -6.7
Q3:2020-21 1,011 13.3 13.5 73.2 0.2 15.5 8.8 75.7 -6.7
Q4:2020-21 967 16.7 13.3 70.0 -3.4 13.3 8.3 78.4 -5.0
Q1:2021-22           22.2 8.2 69.6 -13.9
‘Decrease’ in cost of finance is optimistic.

Table 18: Assessment and Expectations for Cost of Raw Materials
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 41.1 7.1 51.8 -34.1 35.6 5.6 58.8 -30.0
Q1:2020-21 802 39.9 10.7 49.4 -29.3 38.9 5.3 55.7 -33.6
Q2:2020-21 959 46.1 8.2 45.7 -38.0 37.8 5.7 56.5 -32.0
Q3:2020-21 1,011 55.5 3.9 40.6 -51.6 36.7 4.6 58.7 -32.1
Q4:2020-21 967 71.0 2.0 26.9 -69.0 45.2 2.6 52.2 -42.7
Q1:2021-22           64.9 2.5 32.6 -62.4
‘Decrease’ in cost of raw materials is optimistic.

Table 19: Assessment and Expectations for Salary/Other Remuneration
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 27.1 2.3 70.6 -24.8 25.1 3.0 71.9 -22.1
Q1:2020-21 802 12.4 22.0 65.5 9.6 35.8 2.7 61.5 -33.1
Q2:2020-21 959 15.7 12.9 71.4 -2.8 16.5 12.5 70.9 -4.0
Q3:2020-21 1,011 20.8 6.8 72.3 -14.0 15.8 6.8 77.4 -9.0
Q4:2020-21 967 21.8 3.1 75.1 -18.7 19.9 3.9 76.2 -16.0
Q1:2021-22           42.7 1.2 56.1 -41.6
‘Decrease’ in Salary / other remuneration is optimistic.

Table 20: Assessment and Expectations for Selling Price
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 16.4 13.9 69.7 2.5 15.2 13.0 71.9 2.2
Q1:2020-21 802 9.5 26.6 64.0 -17.1 18.0 9.7 72.3 8.3
Q2:2020-21 959 13.9 19.7 66.4 -5.8 12.9 18.9 68.1 -6.0
Q3:2020-21 1,011 21.9 12.5 65.6 9.4 12.8 13.0 74.3 -0.2
Q4:2020-21 967 31.3 8.6 60.1 22.7 19.6 8.9 71.5 10.7
Q1:2021-22           35.0 5.8 59.1 29.2
‘Increase’ in selling price is optimistic.

Table 21: Assessment and Expectations for Profit Margin
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2019-20 860 15.8 27.4 56.8 -11.6 16.3 26.4 57.3 -10.2
Q1:2020-21 802 5.0 61.8 33.2 -56.8 17.5 20.4 62.1 -2.9
Q2:2020-21 959 15.3 41.8 43.0 -26.5 13.7 40.5 45.8 -26.8
Q3:2020-21 1,011 17.4 29.1 53.5 -11.8 14.7 26.7 58.6 -12.0
Q4:2020-21 967 24.9 22.9 52.1 2.0 17.8 20.1 62.1 -2.4
Q1:2021-22           28.8 17.8 53.4 11.0
‘Increase’ in profit margin is optimistic.

Table 22: Assessment and Expectations for Overall Business Situation
(Percentage responses)
Quarter Total response Assessment Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q4:2019-20 860 31.6 15.8 52.6 15.7 35.8 13.2 50.9 22.6
Q1:2020-21 802 8.3 68.5 23.2 -60.2 38.6 10.4 50.9 28.2
Q2:2020-21 959 39.6 27.9 32.5 11.8 41.0 25.3 33.6 15.7
Q3:2020-21 1,011 46.7 13.8 39.6 32.9 45.7 12.8 41.6 32.9
Q4:2020-21 967 49.0 12.4 38.6 36.5 48.2 7.6 44.2 40.7
Q1:2021-22           57.7 5.1 37.2 52.5
‘Better’ Overall Business Situation is optimistic.

Table 23: Business Sentiments
Quarter Business Assessment Index (BAI) Business Expectations Index (BEI)
Q4:2019-20 102.2 105.0
Q1:2020-21 55.3 108.8
Q2:2020-21 96.2 99.5
Q3:2020-21 108.6 111.4
Q4:2020-21 113.1 114.1
Q1:2021-22   119.6

1 The survey results reflect the respondents’ views, which are not necessarily shared by the Reserve Bank. Results of the previous survey round were released on the Bank’s website on February 5, 2021. This round of the survey was launched on January 22, 2021 and results were compiled with data received till March 27, 2021.

2 For each survey round, two 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.

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.


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