Economists optimistic about future, manufacturers and consumers less so

The survey of 25 professional forecasters of macro-economic indicators shows that they expect growth to firm up in 2018-19 on the back of higher private consumption and improvement in investment. Growth will be driven by manufacturing and to a lesser extent by services.

By Prosenjit Datta  
Thursday, April 12, 2018

Professional economists are fairly optimistic about the future but manufacturers expected the first quarter of 2018-19 to be worse on most counts compared to the last quarter of 2017-18. Meanwhile, consumers are also less optimistic about the future than they were even a quarter ago. At least that is what the Reserve Bank of India's (RBI) forward looking surveys, released earlier this month, seem to suggest.

The survey of 25 professional forecasters of macro-economic indicators shows that they expect growth to firm up in 2018-19 on the back of higher private consumption and improvement in investment. Growth will be driven by manufacturing and to a lesser extent by services. Consumer inflation is expected to remain in control and under 5 per cent, according to this survey.

The industrial outlook survey, which captured the business sentiments of the manufacturing sector by talking to 1,250 companies, showed that most respondents were pretty positive about the last quarter of 2017-18. They were optimistic about demand conditions and all major parameters like production, order book, capacity utilisation, imports and exports. Even the availability of finance was better in the last quarter, according to the respondents.

On the other hand, they were less optimistic about the next quarter. The upbeat demand sentiment indicated in the previous two quarters dipped in this one, on almost all parameters barring export and import. Expectations of better finances were also low.

The consumer confidence survey showed that expectations were not particularly great for the future. The consumer confidence survey covered six metropolitan cities - Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi, and had 5,297 respondents.

Consumer confidence waned in March 2018, after showing some improvement in December 2017. The current situation index (CSI) has remained in the pessimistic zone since March 2017. It showed some signs of improvement in the last quarter, but went downhill again in the latest survey. The future expectations index (FEI) also showed a dip in sentiments. While the last quarter survey had largely showed neutral expectations, this round showed that sentiments about the coming year were gloomier. Respondents continued to show concern for the current employment situation and the outlook for the next year was also less positive than the previous survey.

However, on the inflation and cost front, the households' assessment of the current price situation and the outlook for the coming year remained largely unchanged.

Meanwhile, the Order Book, Inventories and Capacity Utilisation Survey (OBICUS), surveying 940 manufacturing companies, showed that the capacity utilisation remained at 74.1 per cent. Capacity utilisation, in fact, has remained stuck at this level since the last quarter of 2014-15, which could explain why fresh investment in Greenfield capacities remains tardy.

 

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