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RBI releases the Monthly Bulletin for September 2016
September, 13th 2016

The Reserve Bank of India today released the September 2016 issue of its monthly Bulletin. The Bulletin includes Speeches by the Top Management, four Articles and Current Statistics. The four Articles are: I. Position of Order Books, Inventories and Capacity Utilisation for the Quarters April 2015 to March 2016; II. Consumer Confidence Survey - Q2:2015-16 to Q1: 2016-17; III. Private Corporate Investment: Growth in 2015-16 and Prospects for 2016-17; and IV. Monthly Seasonal Factors of Select Economic Time Series, 2015-16.

I. Position of Order Books, Inventories and Capacity Utilisation for the Quarters April 2015 to March 2016

The Reserve Bank of India conducts Order Books, Inventories and Capacity Utilisation Survey (OBICUS) on a quarterly basis among manufacturing sector companies in India. This article analyses the movement in the order books, inventories and capacity utilisation of select companies during 2015-16. Salient Findings are:

  • The year-on-year growth in average new orders of sample companies was marginally positive till Q3 but it contracted in Q4.

  • There was no significant accumulation to the inventory levels of sample companies during 2015-16.

  • Level of capacity utilisation (CU) in the Indian manufacturing industry continued to be in the lower trajectory in 2015-16. It, however, recorded a seasonal pick-up in Q4 and stood at 74.1 per cent, similar to the level recorded in the corresponding period of last year.

II. Consumer Confidence Survey - Q2:2015-16 to Q1:2016-17

The Consumer Confidence Survey (CCS), which captures information on economic conditions, prices, employment and also income and spending behaviour of the respondents, is conducted on a quarterly basis in six metropolitan cities, namely, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi covering around 5,400 households. The responses are obtained for two reference points, namely, current situation as compared with a year ago and expectations for a year ahead. The survey results of each quarter are released on the RBI website. This article analyses trends over a longer time period with particular focus on the latest four quarterly rounds (Q2:2015-16 to Q1:2016-17) of the survey. The main findings of the analysis are:

  • Sentiments on economic conditions improved in the second half of 2015-16 along with those on income and employment.

  • In case of spending, the positive sentiment declined in the second half of 2015-16 but improved in Q1:2016-17. Responses on higher spending were closely associated with those on higher inflation.

  • Sentiment for price level for the current period improved since second half of 2014-15. However, future expectations did not reflect higher optimism.

  • The levels of optimism in future economic conditions, income and employment scenario, as in the past, were consistently higher than those relating to current situation.

  • Combination of these factors indicate both, the current situation index and future expectation index after attaining a high in Q4:2014-15 declined during the first half of 2015-16 but showed signs of improvement thereafter.

III. Private Corporate Investment: Growth and Prospects

Project financed by select banks / Financial Institutions (FIs) in 2015-16 signalled marginal improvement in investment sentiment in comparison with 2014-15, as revealed in an annual study undertaken by the Reserve Bank of India. The estimate of capital investment likely to be incurred during the current financial year is based on time phasing details of the investment intentions of the companies in the private and joint sectors, which have raised funds from banks/FIs, through External Commercial Borrowings (ECBs) / Foreign Currency Convertible Bonds (FCCBs) or Initial Public Offerings (IPOs). Taking into consideration the phasing out plans, the estimated capital expenditure was 1,512 billion in 2015-16; 24.7 per cent lower than the revised estimate of 2014-15.The CapEx planned for 2016-17 amounted to 674 billion. In order to maintain the level of CapEx envisaged in 2015-16, a CapEx of 838 billion would have to come from new investment intentions of the private corporate sector in 2016-17. The main results of the study are furnished below:

  • In 2015-16, total cost of projects receiving finance through banks/FIs, ECBs/FCCBs or IPOs aggregated to 1,387 billion as against 1,456 billion in 2014-15. It covers 352 projects with aggregate project cost of 954 billion receiving sanction for financial assistance from banks/FIs, 314 projects with total costs of 388 billion contracting ECBs/FCCBs and 40 projects raising resources through equity issues of 45 billion.

  • An analysis of the industrial pattern of projects reveals that investment plans in 2015-16 were led by ‘Power’ sector. However, sectors such as ‘Roads, Bridges & Waterways’, ‘Ports & Airports’ and ‘Mining & Quarrying’ recorded a rise in 2015-16, while other major industries such as ‘Metals’, ‘Cement’, ‘Construction’ and ‘Hotel’ industries contributed less compared with the previous years. Infrastructure projects witnessed an upsurge during 2015-16. Share of institutionally assisted projects in service sector was low, however, major share of ECBs/FCCBs supported projects was in ‘Telecommunication’. However, the number of high value projects decreased.

  • Majority of the projects receiving financial sanction by Banks/FIs during the five year period (2011-12 to 2015-16) were taken up in the states of Maharashtra, Odisha, Gujarat, Andhra Pradesh and Karnataka.

  • Envisaged CapEx by the private and joint business sectors financed through banks/FIs, ECBs/FCCBs or IPOs during 2010-11 was at 3,706 billion, which went down to 1,512 billion during 2015-16 after successive contractions. Improvements in FDI and private placement of debt for the last few years have sustained the financing of the CapEx. Steps taken to revive stalled projects, enhanced Government spending, steps to fillip FDI inflows and major spectrum auction planned by the Government may improve the prospect for private investment in 2016-17.

IV. Monthly Seasonal Factors of Select Economic Time Series, 2015-16

The article presents estimated monthly seasonal factors of selected 84 major macroeconomic series, broadly covering five major sectors, namely, Monetary and Banking Indicators (17 series), Prices (29 series), Industrial Production (29 series), External Sector (3 series) and Service Sector Indicators (6 series) for the period 2006-07 to 2015-16. The seasonal factors have been estimated using X-13ARIMA-SEATS software package, developed by the US Bureau of Cenus, taking care of Diwali as major festival as well as trading day effects. Salient findings are as under:

  • Seasonal Peaks and Troughs: For a majority of industrial production and monetary/banking indicators, seasonal peaks were found in March and troughs in February/April. Services sector indicators also peaked in March but had their seasonal troughs in September. These suggested the need for seasonal adjustment in these series before analysing short-term changes for policy input or policy evaluation.

  • Indicators with High and Low Seasonality: Among IIP sub-groups, seasonal variation was found to be higher for ‘food products and beverages’ and ‘coal production’ due to production cycle and demand characteristics. For WPI, seasonal variation was found high for ‘food articles’ due to high seasonality of eggs, fruits and vegetables items, resulting from climatic conditions. ‘Sale of commercial motor vehicles’ exhibited high seasonality due to annual festivals and other seasonal demand factors.

  • Changing Seasonality: With more activities moving to organised sector, seasonal fluctuations of monetary and banking series witnessed gradual moderation during the last 10 years. Few IIP groups (viz., ‘consumer goods’, ‘electricity’ ‘rubber and plastics products’, and ‘petroleum refinery production’), however, witnessed some increase in seasonality over the years. Also, the seasonal peak/trough months for some of the indicators shifted during 2015-16 when compared with the average seasonal peak/trough months of the last five years. As such, there is a need for undertaking such an exercise on a regular basis for more precise analysis of momentum in these indicators.

Alpana Killawala
Principal Adviser

Press Release : 2016-2017/647

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