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Date : Aug 06, 2021
Industrial Outlook Survey of the Manufacturing Sector for Q1:2021-22

Today, the Reserve Bank released the results of the 94th round of the Industrial Outlook Survey (IOS) conducted during April-June 2021. The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q1:2021-22 and their expectations for Q2:2021-221. In all, 1281 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 Q1: 2021-22

  • Manufacturing companies assessed deterioration in demand condition measured in terms of production, order books and employment situation during Q1:2021-22 (Table A).

  • Sentiments on financial situation turned negative, driven by decline in all three sources of finance (viz., banks, internal accruals and overseas).

  • Manufacturers perceived higher cost burdens from cost of finance and salary outgo. Input cost pressure remained high but the pessimism was somewhat lower than the previous round.

  • Respondents polled moderation in selling prices and the sentiments on profit margins remained subdued.

  • The business assessment index (BAI)2 contracted to 89.7 in Q1 from 113.1 in previous quarter (Chart 1); the decline was much lower than that witnessed around the onset of the pandemic during Q1:2020-21.

B. Expectations for Q2: 2021-22

  • Production volumes, new orders and job landscape are expected to improve in Q2:2021-22.

  • Manufacturers expect improvement in overall financial situation.

  • A major segment of the respondents anticipates continued pressure from input costs and salary outgo, though the share of such companies declined marginally.

  • More companies expect profit margins to improve.

  • The business expectations index (BEI) increased further to 124.1 in Q2:2021-22 from 119.6 in Q1:2021-22 (Chart 1).

C. Expectations for Q3:2021-22 and Q4:2021-22

  • Manufacturers perceive further improvement in production and overall business situation in Q3:2021-22; and exhibit optimism for Q4:2021-22 (Table B).

  • Capacity utilisation and employment conditions are expected to improve.

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

Table A: Summary of Net responses3 on Survey Parameters
(per cent)
Parameters Assessment period Expectation period
Q4:2020-21 Q1:2021-22 Q1:2021-22 Q2:2021-22
Production 36.3 -25.9 43.7 52.0
Order Books 33.1 -16.4 43.2 50.4
Pending Orders -3.0 10.0 -2.4 -3.7
Capacity Utilisation 29.1 -26.1 38.0 45.4
Inventory of Raw Materials -11.1 -0.3 -11.8 -17.5
Inventory of Finished Goods -7.6 -4.2 -10.9 -19.4
Exports 15.5 -7.8 29.6 43.6
Imports 16.4 1.7 26.1 42.8
Employment 10.9 -3.5 17.9 26.1
Financial Situation (Overall) 29.4 -12.7 47.3 48.2
Availability of Finance (from internal accruals) 23.7 -4.3 34.7 38.6
Availability of Finance (from banks & other sources) 16.5 -2.4 25.6 35.5
Availability of Finance (from overseas, if applicable) 2.7 1.6 13.4 42.7
Cost of Finance -3.4 -4.5 -13.9 -31.5
Cost of Raw Material -69.0 -52.3 -62.4 -54.9
Salary/ Other Remuneration -18.7 -19.9 -41.6 -31.6
Selling Price 22.7 19.6 29.2 28.2
Profit Margin 2.0 -32.2 11.0 32.7
Overall Business Situation 36.5 -20.6 52.5 52.4
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 93 Round 94
Q1:2021-22 Q2:2021-22 Q3:2021-22 Q4:2021-22
Overall Business Situation 52.5 52.4 71.2 70.4
Production 43.7 52.0 72.0 69.6
Order Books 43.2 50.4 72.8 70.1
Capacity Utilisation 38.0 45.4 63.0 61.6
Employment 17.9 26.1 43.1 32.8
Cost of Raw Materials -62.4 -54.9 -55.7 -53.7
Selling Prices 29.2 28.2 43.0 32.2

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
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 1,281 16.5 42.3 41.2 -25.9 53.3 9.7 37.0 43.7
Q2:2021-22           58.8 6.8 34.3 52.0
‘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
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 1,281 20.0 36.5 43.5 -16.4 51.0 7.8 41.1 43.2
Q2:2021-22           56.9 6.5 36.7 50.4
‘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
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 1,281 7.4 17.5 75.1 10.0 11.6 9.2 79.3 -2.4
Q2:2021-22           10.8 7.2 82.0 -3.7
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
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 1,281 13.4 39.5 47.1 -26.1 45.2 7.3 47.5 38.0
Q2:2021-22           51.6 6.2 42.2 45.4
‘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
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 1,281 5.2 18.4 76.3 -13.2 25.3 8.4 66.2 16.9
Q2:2021-22           15.6 7.9 76.5 7.7
‘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
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 1,281 10.8 13.0 76.2 -2.2 20.2 7.3 72.5 12.9
Q2:2021-22           28.4 5.8 65.8 22.6
‘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
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 1,281 18.3 26.1 55.6 -7.8 38.7 9.0 52.3 29.6
Q2:2021-22           49.8 6.2 44.0 43.6
‘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
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 1,281 18.9 17.1 64.0 1.7 32.6 6.6 60.8 26.1
Q2:2021-22           47.3 4.5 48.3 42.8
‘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
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 1,281 11.5 11.2 77.3 -0.3 17.2 5.4 77.4 -11.8
Q2:2021-22           23.7 6.2 70.0 -17.5
‘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
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 1,281 14.4 10.2 75.4 -4.2 16.4 5.5 78.1 -10.9
Q2:2021-22           25.0 5.6 69.4 -19.4
‘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
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 1,281 9.1 12.7 78.2 -3.5 23.5 5.5 71.0 17.9
Q2:2021-22           28.6 2.5 69.0 26.1
‘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
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 1,281 17.8 30.6 51.6 -12.7 53.4 6.1 40.5 47.3
Q2:2021-22           54.0 5.8 40.2 48.2
‘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
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 1,281 24.4 14.0 61.7 10.4 37.6 5.2 57.3 32.4
Q2:2021-22           44.7 3.0 52.2 41.7
‘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
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 1,281 13.3 17.6 69.1 -4.3 39.7 5.1 55.2 34.7
Q2:2021-22           42.4 3.8 53.7 38.6
‘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
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 1,281 10.7 13.1 76.1 -2.4 30.0 4.4 65.6 25.6
Q2:2021-22           38.4 2.9 58.8 35.5
‘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
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 1,281 13.6 12.0 74.5 1.6 16.5 3.1 80.3 13.4
Q2:2021-22           44.0 1.3 54.7 42.7
‘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
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 1,281 15.7 11.3 73.0 -4.5 22.2 8.2 69.6 -13.9
Q2:2021-22           34.9 3.3 61.8 -31.5
‘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
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 1,281 58.1 5.8 36.1 -52.3 64.9 2.5 32.6 -62.4
Q2:2021-22           56.8 2.0 41.2 -54.9
‘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
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 1,281 26.4 6.5 67.1 -19.9 42.7 1.2 56.1 -41.6
Q2:2021-22           32.5 0.9 66.6 -31.6
‘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
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 1,281 26.9 7.3 65.8 19.6 35.0 5.8 59.1 29.2
Q2:2021-22           31.1 2.9 66.0 28.2
‘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
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 1,281 11.8 44.0 44.2 -32.2 28.8 17.8 53.4 11.0
Q2:2021-22           43.7 11.0 45.3 32.7
‘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
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 1,281 18.6 39.2 42.3 -20.6 57.7 5.1 37.2 52.5
Q2:2021-22           59.9 7.5 32.5 52.4
‘Better’ Overall Business Situation is optimistic.

Table 23: Business Sentiments
Quarter Business Assessment Index (BAI) Business Expectations Index (BEI)
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 89.7 119.6
Q2:2021-22   124.1

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 April 7, 2021. This round of the survey was launched on April 22, 2021 and results were compiled with data received till June 30, 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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