The Reserve Bank of India (RBI) in its latest ‘Industrial Outlook Survey of the Manufacturing Sector for Q2:2024-25’ has said that manufacturing companies reported some moderation in demand expansion during Q2:2024-25 as reflected in their assessment on production, order books, capacity utilisation, employment and overall business situation.
As per the report, pressures from cost of raw material, financing cost and salary outgo were assessed to have tempered and, in accordance, sentiments on growth in selling prices and profit margins also moderated. It said that the business assessment index (BAI) remained in expansion zone but moderated to 108.3 in Q2:2024-25 from 110.8 in the previous quarter.
However, manufacturers maintained their optimism on demand conditions for Q3:2024-25. Besides for Q3:2024-25, cost of financing and salary outgo are likely to rise, while pressures from raw material cost are expected to ease, and selling price growth momentum may continue. The business expectations index (BEI) improved to 120.3 in Q3:2024-25 from 119.1 in the previous quarter.
Going forward, manufacturers polled for better expectations on production, order books, employment, capacity utilisation and overall business situation during Q4:2024-25 and Q1:2025-26. For Q4:2024-25 and Q1:2025-26, input cost pressures are likely to continue for manufacturers, who expect to retain pricing power and increase in selling prices on the back of robust demand conditions.
