Business sentiments of firms hit 5-qtr low: RBI survey

AN RBI survey of 1,265 major Indian manufacturing companies has shown that their business sentiment is running quite low.

Call it uncertainty around the general elections or continued stress on the banks, an RBI survey of 1,265 major Indian manufacturing companies has shown that their business sentiment is running quite low.

Among other things, they also fear availability of finances may pose a problem.

The overall business sentiments of the manufacturing sector has hit a five-quarter low of 107.1 points in December quarter of 2018-19 and reached quite close to post-demonetisation quarter of 2016 when it stood at 106 points, the quarterly survey which captures the qualitative assessment of business situation of companies in India revealed.

Between demonetisation and FY19, it reached the highest of 112.4 points in the January-March period of 2017-18, a few months after the implementation of GST.

Demand and production in India’s manufacturing sector deteriorated in the past five quarters as shown in the average backlog and pending orders of goods since July-September period of 2017-18.

It showed that the average backlog order of the country’s manufacturing companies — which stood at Rs 0.796 billion in value terms in the July-September period of 2017-18 — reached Rs 1.682 billion in the same period. This implies that while companies kept producing goods, there were not many buyers.

A year-on-year growth in the average backlog orders with the companies reached 99% in Q2 of FY19 from close to 19% in the same quarter of FY18.

The backlog order of a company reflects the total amount of outstanding orders from customers that have not yet been shipped. It increases each time a new order is received from customers and decreases when an order is shipped to them.

In another biometre of production overshooting demand, the survey showed Indian firms’ pernding order increased from Rs 1.023 billion in September quarter of 2017-18 to Rs 2.036 billion in the same quarter of 2018-19.

A pending order states that customers do not want to buy before the price of a financial instrument reaches a certain point. Sentiments regarding the overall financial situation ebbed slightly, reflecting concerns on the availability of finance from both internal accruals and external sources, the survey said.

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Business sentiments of firms hit 5-qtr low: RBI survey

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