RBI’s Survey Anticipates Upswing of Orders, Production, and Employment in Manufacturing Sector

The Reserve Bank of India (RBI) has published the 93rd Industrial Outlook Survey results conducted during January-March 2021. The results are based on a qualitative analysis of the businesses in the Indian manufacturing companies for the fourth quarter of FY21. It also includes the expectations of the businesses in this sector for the first quarter of FY22.

A total of 967 companies from the manufacturing sector had taken part in the survey. This time around, an additional block was included in the survey owing to the COVID-19 pandemic to assess the outlook on key parameters of the survey for Q2 and Q3 of FY22. 

The manufacturing companies that took part in the survey assessed the future scenario in line with the strengthening of production, order books, and employment, based on the business climate in Q4 of FY21. The assessment stated that the availability of finance from banks, internal accruals, and overseas sources has got much better than last year.

Respondents stated that there might be an elevation in the capacity utilisation and employment conditions in the days to come. However, they also added that they expect higher cost pressures from the purchase of inputs and salary expenses and a hike in selling prices during the quarter. 

In Q1 of FY22, the survey respondents suspect more pressure from the cost of finance, purchase of raw materials, and salaries. On the other hand, they also think that the selling prices and the profit margins would increase. 

As per the survey, the manufacturing industry is foreseeing further improvement in new orders, production volume, employment landscape, and the overall business and financial situation in Q2 and Q3 of FY22.

Due to the COVID-19 pandemic, the manufacturing sector had taken a big hit. With the schemes and support extended by the government, including the MSME loan scheme worth Rs.3 lakh crore, many companies’ liquidity crunch was taken care of. Viewing the same from another perspective, the financing has added an extra cost to these companies.

Having said that, the companies can survive and grow higher thanks to the government’s aid and the recovering economy in the country. The RBI survey findings suggest a ray of hope for these companies shortly.

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in