Manufacturing companies log softer decline in Q2 sales

NEW DELHI:  India’s economic conditions continue to improve led by uptick in manufacturing activity. Data from the Reserve Bank of India (RBI) showed that sales of manufacturing companies returned to recovery mode with a softer contraction of 4.3 per cent (Y-o-Y) in the second quarter of the current financial year (Q2 FY21). In the previous quarter that was hit by nationwide lockdowns due to Covid, demand shrunk 41.1 per cent.

The recovery was led by iron and steel, food products, cement, automobile and pharmaceuticals companies, revealed data on the performance of the private corporate sector during the second quarter. “Manufacturing firms reported sales of Rs 5.99 lakh crore in the second quarter, compared to Rs 3.97 lakh crore in April-June quarter,” said RBI, adding that the data has been drawn from abridged quarterly financial results of 2,637 listed non-government non-financial companies.

As for services, the sales growth of Information Technology (IT) sector remained steady at 3.6 per cent in Q2 FY 2020-21 over last year, while sales of non-IT sector also registered lower contraction of 14.5 per cent led by expansion in sales of telecommunication and real estate companies. As per the data, sales of non-IT firms and IT firms during the second quarter stood at Rs 80,842 crore and Rs 1.01 lakh crore, respectively. 

“Operating profits of manufacturing companies increased on the back of savings in expenditure; operating profits of services (both IT and non-IT) companies also increased in Q2,” RBI said. Furthermore, firms responding to RBI’s industrial outlook survey in its 91st round were hopeful that the upturn that commenced in Q2 would gain momentum. Their optimism was based on the availability of finance, a recovery in external demand and the job scenario.