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Date : Oct 06, 2023
Industrial Outlook Survey of the Manufacturing Sector for Q2:2023-24

Today, the Reserve Bank released the results of 103rd round of its quarterly Industrial Outlook Survey (IOS). The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q2:2023-24 and their expectations for Q3:2023-241 as well as outlook on select parameters for subsequent two quarters. In all, 1,223 companies responded in this round of the survey, which was conducted during Q2:2023-24.

Highlights:

A. Assessment for Q2:2023-24

  • Manufacturing companies reported higher optimism on demand conditions during Q2:2023-24, as reflected in their assessment on production, order books and capacity utilisation (Table A).

  • Respondents reported higher pressure from raw material cost; there was some easing of wage bill and finance cost burden.

  • Net sentiments on profit margin turned positive during Q2:2023-24 after four quarters of negative assessment.

  • Overall business sentiments in the manufacturing sector improved further; the business assessment index (BAI)2 increased to 115.0 in Q2:2023-24 from 112.2 in the previous quarter (Chart 1).

B. Expectations for Q3:2023-24

  • Manufacturers expressed higher optimism for Q3:2023-24, as reflected in their improved expectations on production, order books, capacity utilisation and overall business situation (Table A).

  • Cost pressures from raw materials and financing are likely to persist.

  • Selling prices are expected to rise at a lower rate and profit margins are likely to remain steady.

  • Reflecting the broad-based optimism, the business expectations index (BEI) for Q3:2023-24 improved to 135.4 from 132.5 in the previous quarter (Chart 1).
Chart 1: Business Sentiments

C. Expectations for Q4:2023-24 and Q1:2024-25

  • Manufacturers remain highly optimistic on production, order books, capacity utilisation and overall business situation till Q1:2024-25 (Table B).

  • Input cost pressures are likely to persist for manufacturers, but they also expect pricing power to pass on the rise in selling prices.

Table A: Summary of Net responses3 on Survey Parameters
(per cent)
Parameters Assessment period Expectation period
Q1:2023-24 Q2:2023-24 Q2:2023-24 Q3:2023-24
Production 25.3 34.0 58.0 65.1
Order Books 21.9 30.7 58.1 62.3
Pending Orders 4.9 3.1 -1.7 -1.1
Capacity Utilisation 15.5 29.5 46.6 57.5
Inventory of Raw Materials -6.3 -6.1 -29.0 -27.3
Inventory of Finished Goods -7.2 -7.2 -28.8 -28.2
Exports 17.6 17.7 53.5 53.1
Imports 20.4 17.2 52.6 51.0
Employment 16.1 18.0 40.5 38.8
Financial Situation (Overall) 24.0 30.9 56.3 63.5
Availability of Finance (from internal accruals) 25.8 30.8 52.3 59.1
Availability of Finance (from banks & other sources) 20.4 29.1 49.0 55.8
Availability of Finance (from overseas, if applicable) 18.0 18.6 50.4 53.5
Cost of Finance -32.4 -26.4 -54.2 -54.9
Cost of Raw Material -41.1 -43.8 -58.3 -65.0
Salary/ Other Remuneration -38.1 -28.8 -49.3 -45.6
Selling Price 12.8 11.7 41.4 40.1
Profit Margin -1.2 4.5 35.7 35.8
Overall Business Situation 24.9 34.3 60.7 67.9

Table B: Business Expectations on Select Parameters for extended period – Net response
(per cent)
Parameters Round 102 Round 103
Q2:2023-24 Q3:2023-24 Q4:2023-24 Q1:2024:25
Overall Business Situation 60.7 67.9 67.5 69.9
Production 58.0 65.1 68.2 68.3
Order Books 58.1 62.3 66.0 67.3
Capacity Utilisation 46.6 57.5 65.3 65.0
Employment 40.5 38.8 47.2 45.5
Cost of Raw Materials -58.3 -65.0 -63.0 -63.2
Selling Prices 41.4 40.1 48.6 46.6

Note: Please see the excel file for time series data.

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
Q2:2022-23 1,234 34.3 16.3 49.4 18.1 72.4 5.0 22.6 67.4
Q3:2022-23 1,356 40.5 15.4 44.1 25.1 60.8 4.6 34.5 56.2
Q4:2022-23 1,066 46.3 13.3 40.4 33.0 61.2 3.8 34.9 57.4
Q1:2023-24 1,247 39.6 14.3 46.0 25.3 60.6 5.8 33.6 54.8
Q2:2023-24 1,223 45.2 11.2 43.6 34.0 63.0 5.0 31.9 58.0
Q3:2023-24           70.9 5.7 23.4 65.1
‘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
Q2:2022-23 1,234 30.7 12.1 57.2 18.6 72.7 4.6 22.6 68.1
Q3:2022-23 1,356 33.1 12.1 54.8 21.0 67.1 4.7 28.3 62.4
Q4:2022-23 1,066 37.2 11.8 51.0 25.4 63.3 3.9 32.8 59.4
Q1:2023-24 1,247 33.0 11.1 55.9 21.9 54.6 6.8 38.6 47.8
Q2:2023-24 1,223 41.1 10.4 48.5 30.7 63.0 4.8 32.2 58.1
Q3:2023-24           68.5 6.1 25.4 62.3
‘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
Q2:2022-23 1,234 10.3 17.6 72.0 7.3 7.7 10.3 82.1 2.6
Q3:2022-23 1,356 8.4 14.6 76.9 6.2 10.8 10.1 79.2 -0.7
Q4:2022-23 1,066 4.2 13.1 82.7 8.9 8.9 10.1 81.0 1.2
Q1:2023-24 1,247 9.2 14.1 76.6 4.9 4.5 8.0 87.5 3.4
Q2:2023-24 1,223 8.6 11.6 79.8 3.1 10.9 9.2 79.9 -1.7
Q3:2023-24           9.7 8.5 81.8 -1.1
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
Q2:2022-23 1,234 23.4 14.8 61.8 8.6 65.6 5.0 29.4 60.6
Q3:2022-23 1,356 29.8 15.0 55.2 14.9 51.5 4.9 43.6 46.6
Q4:2022-23 1,066 34.3 11.5 54.1 22.8 51.3 4.1 44.6 47.2
Q1:2023-24 1,247 28.5 13.0 58.5 15.5 46.7 5.5 47.8 41.2
Q2:2023-24 1,223 38.2 8.7 53.0 29.5 51.8 5.2 42.9 46.6
Q3:2023-24           62.1 4.6 33.3 57.5
‘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
Q2:2022-23 1,234 20.5 12.8 66.7 7.8 50.2 6.3 43.5 43.9
Q3:2022-23 1,356 28.7 13.2 58.1 15.5 37.0 6.1 56.9 30.9
Q4:2022-23 1,066 19.8 10.5 69.7 9.3 34.7 8.1 57.2 26.7
Q1:2023-24 1,247 31.4 10.4 58.2 21.0 23.7 6.2 70.2 17.5
Q2:2023-24 1,223 30.5 9.0 60.6 21.5 39.0 6.0 55.1 33.0
Q3:2023-24           36.1 6.1 57.8 30.1
‘Above Normal’ in Level of capacity utilisation is optimistic.

Table 6: Assessment and Expectations for 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
Q2:2022-23 1,234 21.1 6.8 72.1 14.3 51.5 5.4 43.0 46.1
Q3:2022-23 1,356 28.9 4.4 66.7 24.6 42.9 4.5 52.7 38.4
Q4:2022-23 1,066 17.3 5.7 77.0 11.6 42.7 3.3 53.9 39.4
Q1:2023-24 1,247 25.8 5.7 68.4 20.1 25.3 3.8 70.9 21.5
Q2:2023-24 1,223 23.3 4.0 72.7 19.3 43.4 3.9 52.7 39.5
Q3:2023-24           42.7 3.2 54.1 39.5
‘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
Q2:2022-23 1,234 25.2 14.0 60.8 11.1 65.2 4.4 30.4 60.8
Q3:2022-23 1,356 25.6 17.1 57.3 8.5 61.2 5.2 33.6 56.0
Q4:2022-23 1,066 25.4 13.3 61.3 12.2 55.5 3.9 40.6 51.5
Q1:2023-24 1,247 30.1 12.5 57.4 17.6 43.0 6.8 50.2 36.2
Q2:2023-24 1,223 27.7 10.0 62.3 17.7 57.9 4.4 37.7 53.5
Q3:2023-24           58.1 5.0 36.9 53.1
‘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
Q2:2022-23 1,234 23.5 10.1 66.4 13.4 64.5 3.2 32.3 61.3
Q3:2022-23 1,356 23.8 12.2 64.0 11.6 60.8 3.2 36.0 57.6
Q4:2022-23 1,066 22.6 7.3 70.1 15.3 54.3 2.8 42.9 51.5
Q1:2023-24 1,247 28.9 8.6 62.5 20.4 37.4 4.2 58.4 33.2
Q2:2023-24 1,223 25.5 8.2 66.3 17.2 55.8 3.2 41.0 52.6
Q3:2023-24           54.8 3.9 41.3 51.0
‘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
Q2:2022-23 1,234 15.0 10.5 74.5 -4.6 46.1 4.6 49.3 -41.5
Q3:2022-23 1,356 18.1 7.3 74.6 -10.8 32.8 7.1 60.1 -25.7
Q4:2022-23 1,066 13.1 4.7 82.2 -8.3 32.4 5.6 62.0 -26.8
Q1:2023-24 1,247 13.4 7.1 79.5 -6.3 20.5 2.5 76.9 -18.0
Q2:2023-24 1,223 11.5 5.3 83.2 -6.1 33.0 4.0 63.1 -29.0
Q3:2023-24           30.9 3.6 65.6 -27.3
‘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
Q2:2022-23 1,234 14.2 10.2 75.6 -4.0 45.6 4.3 50.1 -41.3
Q3:2022-23 1,356 17.1 7.7 75.2 -9.5 33.4 6.9 59.7 -26.5
Q4:2022-23 1,066 13.3 5.1 81.5 -8.2 31.9 5.8 62.3 -26.1
Q1:2023-24 1,247 14.0 6.8 79.2 -7.2 19.9 2.8 77.3 -17.2
Q2:2023-24 1,223 11.7 4.5 83.7 -7.2 33.2 4.4 62.4 -28.8
Q3:2023-24           31.4 3.3 65.3 -28.2
‘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
Q2:2022-23 1,234 21.5 9.0 69.5 12.5 57.1 2.1 40.8 54.9
Q3:2022-23 1,356 23.0 9.4 67.7 13.6 45.0 1.2 53.9 43.8
Q4:2022-23 1,066 19.3 7.0 73.7 12.4 39.0 2.5 58.5 36.4
Q1:2023-24 1,247 25.9 9.9 64.2 16.1 29.8 3.1 67.1 26.7
Q2:2023-24 1,223 25.1 7.1 67.7 18.0 43.5 3.0 53.5 40.5
Q3:2023-24           42.5 3.7 53.8 38.8
‘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
Q2:2022-23 1,234 28.7 14.8 56.4 13.9 70.4 3.4 26.2 67.1
Q3:2022-23 1,356 35.6 15.5 49.0 20.1 61.4 3.8 34.8 57.7
Q4:2022-23 1,066 40.2 9.6 50.2 30.6 63.9 3.3 32.8 60.6
Q1:2023-24 1,247 36.6 12.6 50.7 24.0 56.3 3.4 40.3 52.9
Q2:2023-24 1,223 41.6 10.7 47.7 30.9 60.2 3.9 35.9 56.3
Q3:2023-24           68.7 5.1 26.2 63.5
‘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
Q2:2022-23 1,234 29.6 6.8 63.5 22.8 65.0 2.6 32.5 62.4
Q3:2022-23 1,356 35.2 7.3 57.5 27.9 51.2 1.6 47.3 49.6
Q4:2022-23 1,066 36.4 4.3 59.3 32.1 52.3 1.1 46.5 51.2
Q1:2023-24 1,247 34.8 5.8 59.4 29.1 48.0 1.9 50.0 46.1
Q2:2023-24 1,223 38.4 5.1 56.6 33.3 53.3 2.2 44.4 51.1
Q3:2023-24           60.2 2.6 37.3 57.6
‘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
Q2:2022-23 1,234 24.0 8.0 68.0 15.9 64.2 2.4 33.4 61.9
Q3:2022-23 1,356 31.1 9.1 59.8 21.9 51.3 2.0 46.7 49.3
Q4:2022-23 1,066 33.3 4.5 62.2 28.8 55.2 1.7 43.1 53.5
Q1:2023-24 1,247 33.2 7.4 59.4 25.8 48.7 2.0 49.3 46.6
Q2:2023-24 1,223 37.1 6.3 56.6 30.8 54.4 2.1 43.5 52.3
Q3:2023-24           61.6 2.5 35.9 59.1
‘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
Q2:2022-23 1,234 21.9 6.5 71.6 15.4 62.2 1.8 36.1 60.4
Q3:2022-23 1,356 26.0 9.1 64.9 17.0 56.7 1.7 41.6 55.1
Q4:2022-23 1,066 27.8 4.5 67.7 23.3 50.5 1.3 48.2 49.2
Q1:2023-24 1,247 26.5 6.1 67.4 20.4 42.2 2.1 55.7 40.1
Q2:2023-24 1,223 34.9 5.7 59.4 29.1 50.5 1.5 47.9 49.0
Q3:2023-24           58.2 2.5 39.3 55.8
‘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
Q2:2022-23 1,234 17.4 6.8 75.8 10.6 65.8 1.2 33.0 64.6
Q3:2022-23 1,356 20.4 9.7 69.9 10.7 59.6 0.8 39.6 58.9
Q4:2022-23 1,066 11.1 3.6 85.3 7.6 51.3 1.3 47.4 50.1
Q1:2023-24 1,247 23.8 5.8 70.4 18.0 34.3 1.8 64.0 32.5
Q2:2023-24 1,223 24.3 5.7 69.9 18.6 52.4 2.0 45.7 50.4
Q3:2023-24           56.4 2.9 40.7 53.5
‘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
Q2:2022-23 1,234 36.1 6.1 57.8 -30.1 65.6 1.6 32.8 -64.0
Q3:2022-23 1,356 37.0 5.9 57.1 -31.1 53.5 1.6 44.9 -51.9
Q4:2022-23 1,066 36.2 3.8 60.0 -32.4 51.6 1.1 47.3 -50.5
Q1:2023-24 1,247 36.9 4.5 58.6 -32.4 47.5 1.7 50.8 -45.8
Q2:2023-24 1,223 33.0 6.6 60.4 -26.4 56.4 2.2 41.5 -54.2
Q3:2023-24           58.5 3.6 37.9 -54.9
‘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
Q2:2022-23 1,234 77.0 4.6 18.4 -72.5 80.6 1.6 17.9 -79.0
Q3:2022-23 1,356 73.0 8.1 18.9 -64.9 66.8 2.6 30.7 -64.2
Q4:2022-23 1,066 64.5 5.4 30.2 -59.1 63.4 2.4 34.2 -60.9
Q1:2023-24 1,247 49.1 8.0 42.8 -41.1 62.6 1.7 35.8 -60.9
Q2:2023-24 1,223 49.3 5.5 45.3 -43.8 60.6 2.4 37.0 -58.3
Q3:2023-24           67.8 2.8 29.3 -65.0
‘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
Q2:2022-23 1,234 30.8 4.4 64.7 -26.4 61.3 0.4 38.3 -60.8
Q3:2022-23 1,356 30.1 3.1 66.8 -27.0 46.3 0.3 53.4 -46.0
Q4:2022-23 1,066 23.1 1.9 75.0 -21.2 39.3 0.6 60.0 -38.7
Q1:2023-24 1,247 41.1 3.0 56.0 -38.1 45.2 0.9 53.9 -44.3
Q2:2023-24 1,223 32.3 3.5 64.2 -28.8 49.8 0.5 49.7 -49.3
Q3:2023-24           47.3 1.7 51.0 -45.6
‘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
Q2:2022-23 1,234 25.1 10.7 64.2 14.4 63.4 3.2 33.4 60.3
Q3:2022-23 1,356 23.3 12.9 63.8 10.4 48.8 3.7 47.5 45.1
Q4:2022-23 1,066 21.6 11.8 66.6 9.7 43.2 3.6 53.1 39.6
Q1:2023-24 1,247 26.1 13.3 60.6 12.8 34.0 5.6 60.4 28.4
Q2:2023-24 1,223 22.3 10.6 67.1 11.7 46.9 5.4 47.7 41.4
Q3:2023-24           45.2 5.2 49.6 40.1
‘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
Q2:2022-23 1,234 16.2 25.5 58.2 -9.3 57.6 10.1 32.3 47.4
Q3:2022-23 1,356 17.6 26.1 56.3 -8.4 44.2 9.0 46.8 35.2
Q4:2022-23 1,066 16.2 21.6 62.1 -5.4 41.0 8.1 50.9 32.9
Q1:2023-24 1,247 20.6 21.8 57.5 -1.2 30.5 11.4 58.1 19.1
Q2:2023-24 1,223 21.9 17.4 60.7 4.5 43.8 8.1 48.1 35.7
Q3:2023-24           45.5 9.7 44.8 35.8
‘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
Q2:2022-23 1,234 31.6 15.7 52.7 15.8 73.9 3.2 22.9 70.7
Q3:2022-23 1,356 37.7 17.4 44.9 20.3 63.8 4.4 31.7 59.4
Q4:2022-23 1,066 45.9 11.4 42.7 34.4 66.9 3.7 29.4 63.1
Q1:2023-24 1,247 39.9 15.0 45.1 24.9 62.4 4.0 33.6 58.3
Q2:2023-24 1,223 46.0 11.8 42.2 34.3 65.0 4.3 30.7 60.7
Q3:2023-24           73.1 5.2 21.7 67.9
‘Better’ Overall Business Situation is optimistic.

Table 23: Business Sentiments
Quarter Business Assessment Index (BAI) Business Expectations Index (BEI)
Q2:2022-23 106.7 137.5
Q3:2022-23 108.6 134.4
Q4:2022-23 112.2 132.9
Q1:2023-24 112.2 126.4
Q2:2023-24 115.0 132.5
Q3:2023-24   135.4

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 August 10, 2023.

2 For each survey round, two summary 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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