Manufacturers less optimistic about demand conditions in Q1: RBI survey

The net responses on the overall business situation moderated to 58.3 per cent in the first quarter of 2023-24 from 63.1 per cent in the last  quarter of FY23.

The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q4 of FY23 and their expectations for Q1 of FY24 as well as outlook on selected parameters for the two subsequent quarters.

In all, 1,066 companies responded in the survey, which was conducted during Q4 FY23. RBI said the survey results reflect the respondents’ views, which are not necessarily shared by it.

The survey showed that the manufacturers see the cost pressures from financing, purchase of raw materials and wages as likely to continue during April-June 2023.

Selling prices and profit margins are expected to continue to rise with some restraint. However, a majority of respondents expect no change in these two parameters.

Business Expectations Index (BEI) for Q1 of 2023-24 exhibited further sign of normalisation by moderating notably at 126.4 from 132.9 in the previous quarter. It remained highly positive.

In Q4 of FY2023, the overall business sentiments remained buoyant as reflected through improved Business Assessment Index (BAI) at 112.2, as against 108.6 in the previous quarter, according to the survey.

On their expectations for Q2 and Q3 2023-24, manufacturers said they remain highly optimistic on production, order books, employment, capacity utilisation and overall business situation. The net responses on overall business situation in Q2 FY2024 was 58.5 per cent and 60.6 per cent for Q4 FY2024, the survey showed.

Manufacturers expect the overall business situation to likely to improve further.

RBI’s Services and Infrastructure Outlook Survey for Q4 of 2022-23 showed that services sector enterprises assessed improvement in overall business situation and their turnover during January-March 2023. In this round of the survey, 638 companies provided their assessment for Q4 FY2023 and expectations for Q1 of FY 2023-24 as well as outlook on key parameters for the subsequent two quarters.

For Q1 FY2024, respondents from the services sector said they are upbeat about overall business situation and the turnover. They expect favourable employment conditions for both full-time and part-time employees though the pace of expansion is likely to be somewhat slower.  Demand for services is likely to grow sequentially till Q3 of FY2024.

The survey showed that the demand parameters in the infrastructure sector are expected to improve in Q1 of FY24 and the job landscape is likely to expand.

Infrastructure firms expressed high optimism on overall business situation and turnover till Q3 of FY2024.

Another RBI survey showed that Consumer Confidence Index improved to 87 in March 2023 from 84.8 in January 2023.