Industrial Outlook Survey hints at sluggish economic revival
India's banking regulator, Reserve Bank of India (RBI), released results of the 87th Industrial Outlook Survey that was conducted during Q2FY20. The data points suggest weak business sentiments during the second quarter.
The survey aims to collect and assess qualitative assessments of the business climate by companies in India's manufacturing sector for Q2FY20 and their expectations for the current quarter. The responses were received from around 481 companies in this round of the survey.
The key highlights of the data points suggested that there was a slump in order inflows, output and employment conditions in the second quarter. The general slowdown was also seen in exports and imports where there was waning optimism which took a hit due to the financial crunch from internal accruals, bank finance and overseas sources. The Business Assessment Index (BAI)2 fell sharply to 92.5 in Q2FY20 from 108.4 in the previous quarter. The outlook for the current quarter too, did not give any positive assessment which was evident from the Business Expectations Index (BEI) that edged lower from 112.8 in second quarter of FY19 to 102.2 in current quarter.
The growth estimates are hit due to uncertain market conditions along with non-supportive macro cues. The domestic market faced liquidity issues after NBFC crisis while the global scenario was hit owing to trade wars and brexit issues.
The baking industry is also facing issues due to the new tax regime during the current quarter. For example, SBI and Bank of Baroda reported healthy pre-provision operating profit but a mark down on deferred tax assets impacted their bottom lines.
The banking industry is showing some signs of revival. Country's largest banking player SBI also hinted towards lower slippages. ICICI reported lower net NPA ratio at 1.6 which dropped by 17 bps. Hence, the RBI surveys conclusion of expecting a volatile quarter can come true.