The Reserve Bank of India’s (RBI’s) industrial outlook survey for the manufacturing sector indicates that business expectations have been falling for the past two quarters.
The chart shows that the Business Expectations Index, or BEI, for the quarter ahead fell from 115.8 for the March 2018 quarter to 114.1 for the June 2018 quarter.
The Business Expectations Index is a composite indicator calculated as a weighted (share of gross value added, or GVA, of different industry groups) net response of nine business indicators: (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 utilization.
It gives a snapshot of the business outlook in every quarter. A reading above 100 indicates expansion while one below 100 signals contraction.
While survey respondents expected an improvement in production, capacity utilization and employment, they believed the cost of finance and raw materials would go up and they wouldn’t be able to raise selling prices.