Capacity Utilisation Fell To 48% In April-June Quarter: RBI Survey

The lockdown announced to curb the spread of Covid-19 and a sharp fall in demand in the April-June quarter pushed capacity utilisation across the industry to below 50%.

Data from the Reserve Bank of India’s “Order Books, Inventories and Capacity Utilisation Survey” shows that capacity utilisation in the manufacturing sector declined sharply to 48.2% in the first quarter. This compares to a seasonally adjusted 68.2% in the previous quarter.

While capacity utilisation had been weak even before the Covid-19 crisis hit, the restrictions on normal business activity hit production further in the first quarter of the year. The RBI, in its Monetary Policy Report, said that manufacturing firms expect better demand starting from the second quarter of the year.

Consumer Confidence Falls

Consumer confidence, too, recorded its third successive fall to an all-time low of 49.9 in September from 53.8 two months ago, according to the RBI’s consumer confidence survey. Consumers were increasingly pessimistic over the economic situation, employment, price and income compared to a year ago, the survey found.

Still, the future expectations index showed an uptick for the second successive survey round. Consumers anticipate improvements in general economic situation, employment conditions and income during the coming year. Discretionary spending, however, is expected to remain low in the near future, according to the RBI.

Inflation Expectations Flat

Current inflation expectations of households remained elevated at 9.8% in September from 9.9% in July. Median inflation expectations over three-month and one-year horizons stood at 10.3% and at 10.4%, respectively, according to the inflation expectations survey of households.