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RBI Monthly Estimates of Money supply and Corporate Performance

14 Oct, 2014

The Reserve Bank of India estimates shows that the Seasonal variation in Broad Money (M3) was observed to be lower than that for Currency in circulation, Narrow Money (M1) and Reserve Money (RM) over the years. After showing an upward movement till 2006-07, the seasonality of M3 declined gradually. Demand Deposits of SCBs witnessed higher seasonal fluctuations than Time Deposits of SCBs, which remained within the narrow band of 1.4 to 2.0. Most of the monetary and banking aggregates witnessed their seasonal peaks in March/ April.
Among the price related series, range of seasonal factors of WPI-All Commodities increased from 1.4 in 2004-05 to 1.7 in 2007-08, and thereafter, reverted to 1.1 in 2010-11 before a gradual increase to 1.4 in 2013-14. For a majority of WPI/CPI series, the seasonal peaks were during August-October. The range of seasonal factors for ‘Primary Articles’ prices was more than three times the seasonality in the WPI-Manufactured Products.
In the case of CPI for Agricultural and Rural Labourers, similar movement in seasonal variations was observed with the former having slightly higher variation than the latter. The seasonality of different CPI series was consistently higher than WPI-All Commodities. The difference between the seasonal variations of CPI series and WPI-All Commodities has however, widened after 2008-09.
Seasonal variation of IIP-General increased marginally over time. Most of the IIP series had their peak seasonality in March. Among the use-based classification of goods, IIP-Consumer non-durable goods exhibited highest seasonality, whereas IIP-intermediate goods was the only group where seasonality has reduced over the years.
Among India’s merchandise trade variables, seasonal variation in export was higher than import except during 2006-09 whereas Non-Oil Non-Gold Import and total merchandise import have shown similar seasonality.

Performance of the Private Corporate Business Sector, 2013-14

The RBI analyses the performance of the private (non-financial) corporate business sector during 2013-14 (April -March) based on the earnings results of 2,854 companies, along with the evolving trend in sales, expenditure and profit margins of the corporate sector over a longer horizon. Besides analysing at the aggregate level, it analyses the corporate performance by size and major industry groups.

Main Findings:

  • The aggregated sales growth of the private (non-financial) corporate business sector moderated during 2013-14, for the third consecutive year. Although, an upturn had been noticed during the second quarter of 2013-14, sales growth declined in the third quarter and then flattened subsequently in the fourth quarter. Performance of small companies further worsened.
  • Moderation in sales growth in the manufacturing sector continued. The services (other than IT) sector also witnessed lower demand. Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) margins declined for the manufacturing and the non-IT services sectors. IT sector has recovered in 2013-14 showing higher growth in sales and net profit after some moderation last year. However, the recovery was not spread across the size groups.
  • The trends in various components of expenditure as a proportion to sales revealed that at the aggregate level, CRM (cost of raw materials) to sales recorded a steady increase till 2011-12 and then moderated in the recent years. Staff cost to sales ratios have increased in the recent two years. The interest to sales ratio increased from 2.3 per cent in 2007-08 and stood at 3.7 per cent in 2013-14, witnessing fluctuations in between.
  • At the aggregate level, EBITDA margin remained steady in 2012-13 and 2013-14, although significantly at a lower level than that in 2007-08. Net profit contracted in 2013-14 for the third consecutive year and net profit margin declined over the last three years.
  • Quarterly results of 2,291 common companies showed an overall declining trend in sales growth during the previous eight quarters. However, it also showed an increase in net profit growth in Q4:2013-14 on a Y-o-Y basis. Limited results for Q1:2014-15 hinted at an improvement in sales growth and profitability.