Demand Conditions In Manufacturing Sector Improved In Q2FY22 Says RBI

Reserve Bank released data on the performance of the private corporate sector during the second quarter of 2021-22 drawn from abridged quarterly financial results of 2,716 listed non-government non-financial (NGNF) companies. Demand conditions in the manufacturing sector improved in Q2:2021-22 as the economy transited into the recovery path, after the restriction related to the second wave of the COVID-19 pandemic were eased; sales of 1,687 listed manufacturing companies recorded steady and broad-based growth of 34.0 per cent on an annual (y-o-y) basis..

Sales growth (y-o-y) of information technology (IT) sector companies, which remained in positive terrain throughout the pandemic, accelerated to 19.5 per cent in Q2:2021-22 from 17.5 per cent in the previous quarter. Sales of non-IT services companies expanded by 27.0 per cent in Q2:2021-22, albeit boosted by favourable base effects. Manufacturing companies increased their expenditure on raw materials in tandem with the surge in sales during Q2:2021-22.

Staff cost growth (y-o-y) also increased across sectors during Q2:2021-22. Rising turnover contributed to higher operating profits of manufacturing companies in Q2:2021-22. Operating profits of services sector companies (both IT and non-IT) also expanded. With reduction in interest outgo and rise in profits, interest coverage ratio (ICR)1 of manufacturing companies increased to 8.7 in Q1:2021-22 (7.5 in the previous quarter); the ICR of non-IT services companies remained below unity. Pricing power in terms of operating profit and net profit margins remained stable for manufacturing and IT companies.