Photographer: Udit Kulshrestha/Bloomberg

RBI’s Manufacturing Survey Shows Some Pick-Up In Capacity Utilisation

The RBI’s forward looking surveys indicate that consumers are optimistic on inflation and more confident of general economic conditions. However, a survey on the manufacturing sector during the second quarter of the current financial year threw up a mixed picture.

Even as capacity utilisation saw an uptick, growth in new orders moderated, showed the RBI’s order books, inventory and capacity utilisation survey.

Capacity utilisation rose to 74.8 percent in the second quarter of the current financial year, up from 73.8 percent in the first quarter, according to the survey. The gradual pick-up in capacity utilisation, if sustained, could lead to a pick-up in private investment.

RBI’s Manufacturing Survey Shows Some Pick-Up In Capacity Utilisation

However, the Monetary Policy Committee that reviews this data as part of its decision on monetary policy, noted that the index of industrial production slowed down in November, after exhibiting an uptick in the festive month of October. Growth in core industries also decelerated to 2.6 percent in December on an annual basis, the MPC stated in it’s sixth bi-monthly resolution.

In its statement, the MPC said that the output gap has opened up modestly as actual output has inched lower than potential. It acknowledged that though investment activity is recovering, it is led by public spending on infrastructure. It emphasised the need is to strengthen private investment activity and buttress private consumption.

Meanwhile a separate industrial outlook survey for the third quarter suggested a weakening of demand conditions in the manufacturing sector. But expectations were optimistic for the fourth quarter.