Slowdown yes, but Q4 will be better: RBI

Profit margins, selling prices, imports and employment generation was expected to improve during January-March 2006 over October-December 2005, according to the industrial outlook survey of the Reserve Bank of India.

The central bank's survey, however, notes that overall, business situation, financial situation, production, order books, capacity utilisation and exports are expected to show some decline over the previous quarter.

Expectations of all these indictors for the fourth quarter of 2005-06 will be better than the corresponding quarter of 2004-05.

The business expectations index for January-March 2006 increased by 2.4 per cent over the quarter ended December 2005. The RBI survey is based on responses received from 934 companies.

The RBI said a normal southwest monsoon, the sustained growth of manufacturing, the buoyancy in services and positive business confidence and expectations have further brightened growth prospects for 2005-06.

Manufacturing witnessed a strong performance during April-November 2005. Although there was some loss of momentum in July 2005, the cumulative growth rate during the first eight months at 9.4 per cent was higher than 9.1 per cent a year ago.

Manufacturing activity was broadbased with all major industry groups, except intermediate goods, accelerating during April-November 2005.

Capital goods recorded a robust growth rate of 15.9 per cent -- the highest growth during the April-November period since 1996-97 -- on the back of strong investment demand in the economy.

Consumer goods also recorded double-digit growth and contributed 48 per cent to the index of industrial production growth during April-November 2005.

The RBI said a broad strengthening of economic activity continued to lead the demand for commercial credit. Commercial banks' non-food credit rose 32 per cent on January 6, 2006, from a year ago on top of a base as high as 26.6 per cent the previous year.