Capacity Utilisation Picked Up In Q3 But Remained Below Pre-Covid Level

Capacity utilisation in India’s manufacturing sector improved in the quarter ended December 2020 amid further easing of restrictions.

The metric stood at 66.6% in the three-month period, up from 63.3% in the preceding quarter, according to data from the Reserve Bank of India’s “Order Books, Inventories and Capacity Utilisation Survey”. The data is released with a lag.

Seasonally adjusted capacity utilisation also increased to 65.2% in third quarter from 64.4% in the previous quarter.

While manufacturing firms received more new orders in the third quarter over the preceding period, its sequential growth was moderate as it was on top of a period characterised by surge in orders amid easing of lockdown related restrictions, the survey said.

Consumer Confidence Dips

Consumer confidence dipped to 53.1 in March 2021 from 55.5 in January 2021, according to the RBI’s survey on consumer confidence. Future expectations also dipped to 108.8 from 117.1 in the same duration.

The moderation was driven by lower expectations on the general economic situation, the employment scenario and income conditions.

Consumer confidence has dipped with the recent surge in Covid-19 infections in some states imparting uncertainty to the outlook, the MPC resolution said.

Firms engaged in manufacturing, services and infrastructure polled by the central bank in March 2021 were optimistic about a pick-up in demand and expansion in business activity into 2021-22, according to the central bank’s findings.

Inflation Expectations Rose

Three months and one year ahead median inflation expectations of urban households rose by 80 basis points to 10.1% and 10 basis points to 10.2% respectively in the March 2021 round of the RBI’s survey in tandem with higher food and oil prices. The proportion of respondents expecting the general price level to increase by more than the current rate also increased for both three months and one year ahead horizons vis-à-vis the previous round.

(Corrects an earlier version that misstated the consumer confidence figure for March 2021.)