RBI survey finds deterioration in business climate

The industrial outlook survey of the Reserve Bank of India (RBI) has pointed towards further deterioration of business climate in the July-September and October-December quarters, but not a contraction in output.

The survey - which gives an assessment of business situation of companies in the manufacturing sector for July-September, and their expectations for the October-December quarter - has signalled further weakened business conditions in the manufacturing sector for the assessment quarter and for the expectation quarter.

The Business Expectation Index, a measure that gives a snapshot of the industrial outlook in each study quarter, dropped to 109.4 from 116.3 for the assessment quarter and to 118.8 from 121.5 for the expectation quarter. "However, it still remains well above 100, the threshold that separates contraction from expansion," RBI said.

 

The Index of Industrial Production, which was released by the government today, showed that factory output contracted by 5.1 per cent in October, the first drop since June 2009.

According to the RBI survey, the demand conditions based on production, order books, capacity utilisation, imports and exports showed signs of further moderation during the assessment quarter and the expectation quarter.

"This is reflected in decline in net response in favour of higher production, order books, capacity utilisation, imports and exports," RBI said.