Reserve Bank’s latest industrial outlook survey has found there is “no improvement” in overall business sentiments for the third quarter of this ongoing fiscal when compared with the preceding three months.
The survey, which covered 723 manufacturing firms, provides qualitative assessment of business situation of companies in the manufacturing sector for the second quarter and their expectations for the ensuing three-month period this fiscal. The survey was conducted during August-September 2016.
It indicated slight moderation in the sentiments in demand condition in the July-August quarter as compared with the April-June period of 2016-17. On a net basis, percentage of respondents favoring increase in production, order books, capacity utilisation and exports/imports was lower in this quarter.
“Availability of finance from banks and other sources was perceived to have improved along with reduced pessimism in the cost of finance. Sentiments on cost of raw material, however, deteriorated. Without commemorate increase in selling price, the profit margin was perceived to have declined further,” the survey findings said.
The survey responses are those of the respondents and are not necessarily shared by the Reserve Bank of India.
The outlook on business sentiments in third quarter of 2016-17 remained quite similar to that in the second quarter.
Optimism was expressed in production, capacity utilisation and in overall financial situation. However, pressure due to rise in cost of raw material is expected to keep profit margin unchanged.
RBI’s Consumer Confidence Survey revealed that Current Situation Index (CSI) slid down marginally during September 2016 round of the survey mainly due to decrease in the net response of price levels and spending perceptions.
Future Expectations Index (FEI), however, improved by 1.3 percentage points and reached 123.3 in the current round of the study as compared to June 2016 survey due to higher perception on future economic conditions and price expectations. The survey is based on 5,000 response.
The RBI further said net response on current as well as future spending on non-essential items also improved substantially – by around 18 percentage points – during this round of the survey as compared to June 2016.
Another study on Households’ Inflation Expectations – September 2016 showed that proportion of respondents expecting general prices to rise by ‘more than current rate’ in three months and one year ahead increased in September 2016 round.
The survey was conducted across 18 cities and covered about 5,300 urban households from various categories.
The RBI also released results of the Survey of Professional Forecasters on Macroeconomic Indicators.
Forecast of output growth, measured using Gross Value Added at basic prices, have been kept unchanged from the previous round of survey at 7.6 per cent in 2016-17 and 7.8 per cent in 2017-18, the RBI said.
“Quarterly growth projections for the next five quarters indicate that growth is likely to reach 8 per cent in the second quarter of 2017-18,” the survey said.
Forecast for CPI headline inflation has also been brought down from the previous round and it is expected to be less than 5 per cent from the third quarter of 2016-17.