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Decline in Overall Business Sentiments for Q4:2016-17: RBI’s Industrial Outlook Survey finds

The 76th round of the Reserve Bank of India’s Industrial Outlook Survey (IOS) indicated a decline in business sentiments. This round of the survey was conducted during October-December 2016. The survey elicited response from 1221 manufacturing companies.

The survey provides qualitative assessment of business situation of companies in the Indian manufacturing sector for Q3:2016-17 and their expectations for the ensuing quarter Q4:2016-17. Results of 75th round (Q2:2016-17) of the survey were released on October 4, 2016 on the RBI website.

The survey responses are those of the respondents and are not necessarily shared by the Reserve Bank of India.

Highlights:

Assessment for Q3:2016-17

The survey indicated slight moderation in the sentiments in demand condition for the second successive quarter. In respect of several parameters like order books, capacity utilisation and imports, the level of optimism was lower in this quarter than Q2:2016-17. However, the respondents were somewhat more optimistic about the export performance than Q2:2016-17 while the optimism on production remained unchanged.

Availability of finance from banks and other sources were perceived to have worsened. However, due to reduced pessimism about the cost of finance and the cost of raw material, the sentiment on profit margin remained largely unchanged.

Overall, the business sentiments of the Indian manufacturing sector, as inferred from the Business Expectation Index (BEI), deteriorated for the second successive quarter.

Decline in Overall Business Sentiments for Q4:2016-17: RBI’s Industrial Outlook Survey finds

Expectation for Q4: 2016-17

The outlook on business sentiments in Q4: 2016-17 largely followed similar pattern. However, in respect of demand condition (Order Books, Production), the outlook deteriorated. Pressure from rise in cost of raw material was expected to bring down profit margin. Improved sentiments were expressed in pending orders, exports, and cost of finance.

The summary index BEI declined from the Q3: 2016-17 level.

Decline in Overall Business Sentiments for Q4:2016-17: RBI’s Industrial Outlook Survey finds

1 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.

2 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.


REST CONTENTS ON ASSESSMENT AND EXPECTATION FOR Production, Order Books, Pending Orders, Capacity Utilisation, Exports, Imports, level of Inventory (Raw Material and Finished Goods), Employment Outlook, Overall Financial Situation, Working Capital Finance Requirement, Availability of Finance, Cost of Finance, Cost of Raw Material, Selling Price, Profit Margin, Overall Business Situation, Salary/Other Remuneration, Business Expectation Index(BEI) is available here - link

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