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Date : Apr 05, 2024
Industrial Outlook Survey of the Manufacturing Sector for Q4:2023-24

Today, the Reserve Bank released the results of 105th round of its quarterly industrial outlook survey (IOS). The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies for Q4:2023-24 and their expectations for Q1:2024-251 as well as outlook on select parameters for subsequent two quarters. In all, 1,354 companies responded in this round of the survey, which was conducted during January-March 2024.

Highlights:

A. Assessment for Q4:2023-24

  • Manufacturers reported better demand conditions in their assessment of production, order books, capacity utilisation and overall business situation for Q4:2023-24 (Table A).

  • Respondents assessed improvement in employment situation vis-à-vis the previous quarter.

  • Input cost pressures increased during Q4:2023-24; the pace of rise in remuneration, however, moderated.

  • Sentiments on overall financial situation and availability of finance remained positive, with some improvement vis-à-vis the previous survey round.

  • Manufacturers polled lower rise in selling prices and assessed some deterioration in profit margins.

  • The business assessment index (BAI)2 for the manufacturing sector increased marginally to 114.2 in Q4:2023-24 from 113.9 in the previous quarter (Chart 1).

B. Expectations for Q1:2024-25

  • Manufacturers remained optimistic on demand conditions in Q1:2024-25, with well over half of the respondents reporting rise in production, order books and overall business situation; the optimism was, however, lower when compared to that in the previous quarter, which is partly seasonal (Tables A, 1, 2 and 22).

  • Cost pressures from raw materials and salary outgo are likely to persist during April-June 2024.

  • Respondents expected some moderation in growth of selling prices and profit margins in synchrony with their expectations for demand conditions (Table B).

  • The business expectations index (BEI) remained firmly in growth terrain at 127.2 in Q1:2024-25 though it moderated from its level of 130.3 in the previous survey round (Chart 1).

Chart 1

C. Expectations for Q2 and Q3:2024-25

  • Manufacturers remained optimistic on production, capacity utilisation, order books, employment conditions and overall business situation (Table B).

  • Input cost pressures are expected to continue till end-2024; selling price is anticipated to uphold during Q2 and Q3 of 2024-25.

Table A: Summary of Net responses3 on Survey Parameters
(per cent)
Parameters Assessment period Expectation period
Q3:2023-24 Q4:2023-24 Q4:2023-24 Q1:2024:25
Production 29.0 34.4 58.1 54.0
Order Books 26.3 31.8 55.8 51.1
Pending Orders 3.3 6.2 1.1 1.8
Capacity Utilisation 19.6 24.9 46.7 43.6
Inventory of Raw Materials -8.9 -7.3 -25.7 -16.3
Inventory of Finished Goods -9.5 -6.4 -25.3 -16.2
Exports 11.6 15.7 43.6 36.1
Imports 14.5 13.8 41.0 31.1
Employment 18.2 16.8 39.5 29.1
Financial Situation (Overall) 25.6 34.8 54.2 54.0
Availability of Finance (from internal accruals) 23.7 29.9 47.4 44.8
Availability of Finance (from banks & other sources) 23.2 26.1 44.5 40.5
Availability of Finance (from overseas, if applicable) 14.2 15.9 43.9 33.2
Cost of Raw Material -33.4 -43.8 -54.2 -52.8
Cost of Finance -22.5 -24.8 -45.9 -36.3
Salary/ Other Remuneration -26.2 -24.3 -42.0 -51.9
Selling Price 10.2 8.1 34.8 24.7
Profit Margin 1.4 -3.4 30.8 20.0
Overall Business Situation 28.6 35.9 58.3 56.5

Table B: Business Expectations on Select Parameters for extended period – Net response
(per cent)
Parameters Round 104 Round 105
Q4:2023-24 Q1:2024:25 Q2:2024:25 Q3:2024:25
Overall Business Situation 58.3 56.5 57.7 60.8
Production 58.1 54.0 53.6 58.7
Order Books 55.8 51.1 53.8 57.9
Capacity Utilisation 46.7 43.6 51.0 53.6
Employment 39.5 29.1 32.4 33.3
Cost of Raw Materials -54.2 -52.8 -52.0 -53.2
Selling Prices 34.8 24.7 31.3 31.5

Note: Please see the excel file for time series data.

Table 1: Assessment and Expectations for Production
(Percentage responses)@
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 46.3 13.3 40.4 33.0 61.2 3.8 34.9 57.4
Q1:2023-24 1,247 39.6 14.3 46.0 25.3 60.6 5.8 33.6 54.8
Q2:2023-24 1,223 45.2 11.2 43.6 34.0 63.0 5.0 31.9 58.0
Q3:2023-24 1,040 41.2 12.2 46.7 29.0 70.9 5.7 23.4 65.1
Q4:2023-24 1,354 46.6 12.3 41.1 34.4 62.3 4.2 33.6 58.1
Q1:2024-25           60.0 6.0 34.0 54.0
‘Increase’ in production is optimistic.
@:Due to rounding off percentage may not add up to 100.

Table 2: Assessment and Expectations for Order Books
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 37.2 11.8 51.0 25.4 63.3 3.9 32.8 59.4
Q1:2023-24 1,247 33.0 11.1 55.9 21.9 54.6 6.8 38.6 47.8
Q2:2023-24 1,223 41.1 10.4 48.5 30.7 63.0 4.8 32.2 58.1
Q3:2023-24 1,040 38.3 12.0 49.7 26.3 68.5 6.1 25.4 62.3
Q4:2023-24 1,354 43.4 11.6 44.9 31.8 61.8 6.0 32.1 55.8
Q1:2024-25           57.1 6.0 36.9 51.1
‘Increase’ in order books is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 3: Assessment and Expectations for Pending Orders
(Percentage responses)
Quarter Total response Assessment Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q4:2022-23 1,066 4.2 13.1 82.7 8.9 8.9 10.1 81.0 1.2
Q1:2023-24 1,247 9.2 14.1 76.6 4.9 4.5 8.0 87.5 3.4
Q2:2023-24 1,223 8.6 11.6 79.8 3.1 10.9 9.2 79.9 -1.7
Q3:2023-24 1,040 8.6 11.9 79.4 3.3 9.7 8.5 81.8 -1.1
Q4:2023-24 1,354 5.5 11.7 82.8 6.2 8.2 9.3 82.5 1.1
Q1:2024-25           6.4 8.1 85.5 1.8
Pending orders ‘Below Normal’ is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 4: Assessment and Expectations for Capacity Utilisation (Main Product)
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 34.3 11.5 54.1 22.8 51.3 4.1 44.6 47.2
Q1:2023-24 1,247 28.5 13.0 58.5 15.5 46.7 5.5 47.8 41.2
Q2:2023-24 1,223 38.2 8.7 53.0 29.5 51.8 5.2 42.9 46.6
Q3:2023-24 1,040 30.1 10.6 59.3 19.6 62.1 4.6 33.3 57.5
Q4:2023-24 1,354 34.9 9.9 55.2 24.9 51.2 4.6 44.2 46.7
Q1:2024-25           48.4 4.8 46.8 43.6
‘Increase’ in capacity utilisation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 5: Assessment and Expectations for Level of CU (compared to the average in last 4 quarters)
(Percentage responses)
Quarter Total response Assessment Expectations
Above Normal Below Normal Normal Net response Above Normal Below Normal Normal Net response
Q4:2022-23 1,066 19.8 10.5 69.7 9.3 34.7 8.1 57.2 26.7
Q1:2023-24 1,247 31.4 10.4 58.2 21.0 23.7 6.2 70.2 17.5
Q2:2023-24 1,223 30.5 9.0 60.6 21.5 39.0 6.0 55.1 33.0
Q3:2023-24 1,040 26.2 9.4 64.4 16.7 36.1 6.1 57.8 30.1
Q4:2023-24 1,354 20.0 10.4 69.6 9.6 33.3 5.7 61.1 27.6
Q1:2024-25           22.5 7.1 70.4 15.4
‘Above Normal’ in Level of capacity utilisation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 6: Assessment and Expectations for Assessment of Production Capacity (with regard to expected demand in next 6 months)
(Percentage responses)
Quarter Total response Assessment Expectations
More than adequate Less than adequate Adequate Net response More than adequate Less than adequate Adequate Net response
Q4:2022-23 1,066 17.3 5.7 77.0 11.6 42.7 3.3 53.9 39.4
Q1:2023-24 1,247 25.8 5.7 68.4 20.1 25.3 3.8 70.9 21.5
Q2:2023-24 1,223 23.3 4.0 72.7 19.3 43.4 3.9 52.7 39.5
Q3:2023-24 1,040 25.1 4.7 70.2 20.4 42.7 3.2 54.1 39.5
Q4:2023-24 1,354 17.7 5.6 76.7 12.1 38.5 3.6 57.9 34.9
Q1:2024-25           27.2 4.7 68.1 22.5
‘More than adequate’ in Assessment of Production Capacity is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 7: Assessment and Expectations for Exports
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 25.4 13.3 61.3 12.2 55.5 3.9 40.6 51.5
Q1:2023-24 1,247 30.1 12.5 57.4 17.6 43.0 6.8 50.2 36.2
Q2:2023-24 1,223 27.7 10.0 62.3 17.7 57.9 4.4 37.7 53.5
Q3:2023-24 1,040 25.1 13.5 61.3 11.6 58.1 5.0 36.9 53.1
Q4:2023-24 1,354 26.4 10.7 62.9 15.7 50.3 6.7 43.0 43.6
Q1:2024-25           41.6 5.5 52.9 36.1
‘Increase’ in exports is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 8: Assessment and Expectations for Imports
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 22.6 7.3 70.1 15.3 54.3 2.8 42.9 51.5
Q1:2023-24 1,247 28.9 8.6 62.5 20.4 37.4 4.2 58.4 33.2
Q2:2023-24 1,223 25.5 8.2 66.3 17.2 55.8 3.2 41.0 52.6
Q3:2023-24 1,040 23.2 8.7 68.0 14.5 54.8 3.9 41.3 51.0
Q4:2023-24 1,354 21.6 7.8 70.6 13.8 45.2 4.2 50.6 41.0
Q1:2024-25           35.2 4.1 60.7 31.1
‘Increase’ in imports is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 9: Assessment and Expectations for level of Raw Materials Inventory
(Percentage responses)
Quarter Total response Assessment Expectations
Above average Below average Average Net response Above average Below average Average Net response
Q4:2022-23 1,066 13.1 4.7 82.2 -8.3 32.4 5.6 62.0 -26.8
Q1:2023-24 1,247 13.4 7.1 79.5 -6.3 20.5 2.5 76.9 -18.0
Q2:2023-24 1,223 11.5 5.3 83.2 -6.1 33.0 4.0 63.1 -29.0
Q3:2023-24 1,040 12.9 4.1 83.0 -8.9 30.9 3.6 65.6 -27.3
Q4:2023-24 1,354 13.3 6.0 80.7 -7.3 27.4 1.7 70.9 -25.7
Q1:2024-25           20.2 3.9 75.9 -16.3
‘Below average’ Inventory of raw materials is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 10: Assessment and Expectations for level of Finished Goods Inventory
(Percentage responses)
Quarter Total response Assessment Expectations
Above average Below average Average Net response Above average Below average Average Net response
Q4:2022-23 1,066 13.3 5.1 81.5 -8.2 31.9 5.8 62.3 -26.1
Q1:2023-24 1,247 14.0 6.8 79.2 -7.2 19.9 2.8 77.3 -17.2
Q2:2023-24 1,223 11.7 4.5 83.7 -7.2 33.2 4.4 62.4 -28.8
Q3:2023-24 1,040 14.0 4.5 81.5 -9.5 31.4 3.3 65.3 -28.2
Q4:2023-24 1,354 12.4 6.0 81.7 -6.4 27.3 2.0 70.7 -25.3
Q1:2024-25           20.1 3.9 75.9 -16.2
‘Below average’ Inventory of finished goods is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 11: Assessment and Expectations for Employment Outlook
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 19.3 7.0 73.7 12.4 39.0 2.5 58.5 36.4
Q1:2023-24 1,247 25.9 9.9 64.2 16.1 29.8 3.1 67.1 26.7
Q2:2023-24 1,223 25.1 7.1 67.7 18.0 43.5 3.0 53.5 40.5
Q3:2023-24 1,040 25.1 6.9 67.9 18.2 42.5 3.7 53.8 38.8
Q4:2023-24 1,354 21.7 4.9 73.4 16.8 41.7 2.2 56.1 39.5
Q1:2024-25           31.3 2.2 66.5 29.1
‘Increase’ in employment is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 12: Assessment and Expectations for Overall Financial Situation
(Percentage responses)
Quarter Total response Assessment Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q4:2022-23 1,066 40.2 9.6 50.2 30.6 63.9 3.3 32.8 60.6
Q1:2023-24 1,247 36.6 12.6 50.7 24.0 56.3 3.4 40.3 52.9
Q2:2023-24 1,223 41.6 10.7 47.7 30.9 60.2 3.9 35.9 56.3
Q3:2023-24 1,040 36.8 11.2 52.0 25.6 68.7 5.1 26.2 63.5
Q4:2023-24 1,354 45.0 10.1 44.9 34.8 58.2 4.0 37.8 54.2
Q1:2024-25           59.2 5.2 35.6 54.0
‘Better’ overall financial situation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 13: Assessment and Expectations for Working Capital Finance Requirement
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 36.4 4.3 59.3 32.1 52.3 1.1 46.5 51.2
Q1:2023-24 1,247 34.8 5.8 59.4 29.1 48.0 1.9 50.0 46.1
Q2:2023-24 1,223 38.4 5.1 56.6 33.3 53.3 2.2 44.4 51.1
Q3:2023-24 1,040 32.8 6.9 60.3 26.0 60.2 2.6 37.3 57.6
Q4:2023-24 1,354 37.5 4.7 57.8 32.8 49.6 2.9 47.6 46.7
Q1:2024-25           46.6 3.0 50.4 43.6
‘Increase’ in working capital finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 14: Assessment and Expectations for Availability of Finance (from Internal Accruals)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2022-23 1,066 33.3 4.5 62.2 28.8 55.2 1.7 43.1 53.5
Q1:2023-24 1,247 33.2 7.4 59.4 25.8 48.7 2.0 49.3 46.6
Q2:2023-24 1,223 37.1 6.3 56.6 30.8 54.4 2.1 43.5 52.3
Q3:2023-24 1,040 30.6 6.9 62.5 23.7 61.6 2.5 35.9 59.1
Q4:2023-24 1,354 35.9 6.0 58.0 29.9 49.3 2.0 48.7 47.4
Q1:2024-25           47.7 2.9 49.4 44.8
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 15: Assessment and Expectations for Availability of Finance (from banks and other sources)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2022-23 1,066 27.8 4.5 67.7 23.3 50.5 1.3 48.2 49.2
Q1:2023-24 1,247 26.5 6.1 67.4 20.4 42.2 2.1 55.7 40.1
Q2:2023-24 1,223 34.9 5.7 59.4 29.1 50.5 1.5 47.9 49.0
Q3:2023-24 1,040 28.8 5.6 65.5 23.2 58.2 2.5 39.3 55.8
Q4:2023-24 1,354 31.2 5.1 63.6 26.1 46.5 2.1 51.4 44.5
Q1:2024-25           43.2 2.8 54.0 40.5
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 16: Assessment and Expectations for Availability of Finance (from overseas, if applicable)
(Percentage responses)
Quarter Total response Assessment Expectations
Improve Worsen No change Net response Improve Worsen No change Net response
Q4:2022-23 1,066 11.1 3.6 85.3 7.6 51.3 1.3 47.4 50.1
Q1:2023-24 1,247 23.8 5.8 70.4 18.0 34.3 1.8 64.0 32.5
Q2:2023-24 1,223 24.3 5.7 69.9 18.6 52.4 2.0 45.7 50.4
Q3:2023-24 1,040 20.2 6.0 73.9 14.2 56.4 2.9 40.7 53.5
Q4:2023-24 1,354 21.2 5.2 73.6 15.9 45.3 1.4 53.4 43.9
Q1:2024-25           35.9 2.7 61.5 33.2
‘Improvement’ in availability of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 17: Assessment and Expectations for Cost of Finance
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 36.2 3.8 60.0 -32.4 51.6 1.1 47.3 -50.5
Q1:2023-24 1,247 36.9 4.5 58.6 -32.4 47.5 1.7 50.8 -45.8
Q2:2023-24 1,223 33.0 6.6 60.4 -26.4 56.4 2.2 41.5 -54.2
Q3:2023-24 1,040 29.2 6.8 64.0 -22.5 58.5 3.6 37.9 -54.9
Q4:2023-24 1,354 31.3 6.5 62.3 -24.8 48.8 2.9 48.3 -45.9
Q1:2024-25           40.3 4.1 55.6 -36.3
‘Decrease’ in cost of finance is optimistic. Footnote ‘@’ given in Table 1 is applicable here. The column heads, namely ‘Increase’ and ‘Decrease’ in data releases for rounds 82-87 were interchanged and should be read as above.

Table 18: Assessment and Expectations for Cost of Raw Materials
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 64.5 5.4 30.2 -59.1 63.4 2.4 34.2 -60.9
Q1:2023-24 1,247 49.1 8.0 42.8 -41.1 62.6 1.7 35.8 -60.9
Q2:2023-24 1,223 49.3 5.5 45.3 -43.8 60.6 2.4 37.0 -58.3
Q3:2023-24 1,040 41.8 8.4 49.7 -33.4 67.8 2.8 29.3 -65.0
Q4:2023-24 1,354 50.2 6.3 43.5 -43.8 57.0 2.9 40.1 -54.2
Q1:2024-25           55.9 3.1 40.9 -52.8
‘Decrease’ in cost of raw materials is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 19: Assessment and Expectations for Salary/Other Remuneration
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 23.1 1.9 75.0 -21.2 39.3 0.6 60.0 -38.7
Q1:2023-24 1,247 41.1 3.0 56.0 -38.1 45.2 0.9 53.9 -44.3
Q2:2023-24 1,223 32.3 3.5 64.2 -28.8 49.8 0.5 49.7 -49.3
Q3:2023-24 1,040 30.3 4.1 65.7 -26.2 47.3 1.7 51.0 -45.6
Q4:2023-24 1,354 26.1 1.8 72.1 -24.3 42.9 0.9 56.2 -42.0
Q1:2024-25           52.9 0.9 46.2 -51.9
‘Decrease’ in Salary / other remuneration is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 20: Assessment and Expectations for Selling Price
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 21.6 11.8 66.6 9.7 43.2 3.6 53.1 39.6
Q1:2023-24 1,247 26.1 13.3 60.6 12.8 34.0 5.6 60.4 28.4
Q2:2023-24 1,223 22.3 10.6 67.1 11.7 46.9 5.4 47.7 41.4
Q3:2023-24 1,040 22.0 11.9 66.1 10.2 45.2 5.2 49.6 40.1
Q4:2023-24 1,354 18.9 10.8 70.3 8.1 40.4 5.6 54.0 34.8
Q1:2024-25           30.5 5.7 63.8 24.7
‘Increase’ in selling price is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 21: Assessment and Expectations for Profit Margin
(Percentage responses)
Quarter Total response Assessment Expectations
Increase Decrease No change Net response Increase Decrease No change Net response
Q4:2022-23 1,066 16.2 21.6 62.1 -5.4 41.0 8.1 50.9 32.9
Q1:2023-24 1,247 20.6 21.8 57.5 -1.2 30.5 11.4 58.1 19.1
Q2:2023-24 1,223 21.9 17.4 60.7 4.5 43.8 8.1 48.1 35.7
Q3:2023-24 1,040 20.5 19.1 60.4 1.4 45.5 9.7 44.8 35.8
Q4:2023-24 1,354 17.2 20.6 62.1 -3.4 40.3 9.5 50.2 30.8
Q1:2024-25           30.4 10.4 59.2 20.0
‘Increase’ in profit margin is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 22: Assessment and Expectations for Overall Business Situation
(Percentage responses)
Quarter Total response Assessment Expectations
Better Worsen No change Net response Better Worsen No change Net response
Q4:2022-23 1,066 45.9 11.4 42.7 34.4 66.9 3.7 29.4 63.1
Q1:2023-24 1,247 39.9 15.0 45.1 24.9 62.4 4.0 33.6 58.3
Q2:2023-24 1,223 46.0 11.8 42.2 34.3 65.0 4.3 30.7 60.7
Q3:2023-24 1,040 40.6 12.0 47.4 28.6 73.1 5.2 21.7 67.9
Q4:2023-24 1,354 47.2 11.3 41.4 35.9 62.5 4.2 33.3 58.3
Q1:2024-25           62.0 5.5 32.5 56.5
‘Better’ Overall Business Situation is optimistic. Footnote ‘@’ given in Table 1 is applicable here.

Table 23: Business Sentiments
Quarter Business Assessment Index (BAI) Business Expectations Index (BEI)
Q4:2022-23 112.2 132.9
Q1:2023-24 112.2 126.4
Q2:2023-24 115.0 132.5
Q3:2023-24 113.9 135.4
Q4:2023-24 114.2 130.3
Q1:2024-25   127.2

1 The survey results reflect the respondents’ views, which are not necessarily shared by the Reserve Bank. Results of the previous survey round were released on the Bank’s website on February 08, 2024.

2 For each survey round, two summary indices are computed – one based on assessment [viz., Business Assessment Index (BAI)] and another based on expectations [viz., Business Expectations Index (BEI)]. Each index is a composite indicator calculated as a simple average of nine business parameters, where each parameter is derived as a weighted net response, weights being the share of industry groups in gross value added (GVA). The nine parameters considered are: (1) overall business situation; (2) production; (3) order books; (4) inventory of raw material; (5) inventory of finished goods; (6) profit margins; (7) employment; (8) exports; and (9) capacity utilisation. BAI/BEI gives a snapshot of the business outlook in every quarter and takes values between 0 and 200, with 100 being the threshold separating expansion from contraction.

3 Net Response (NR) is the difference between the percentage of respondents reporting optimism and those reporting pessimism. It ranges between -100 to 100. Any value greater than zero indicates expansion/optimism and any value less than zero indicates contraction/pessimism. In other words, NR = (I – D), where, I is the percentage response of ‘Increase/optimism’, and D is the percentage response of ‘Decrease/pessimism’ and E is the percentage response as ‘no change/equal’ (i.e., I+D+E=100). For example, increase in production is optimism whereas decrease in cost of raw material is optimism.

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