Industrial Outlook
Industrial Outlook is an economic indicator that measures the degree of optimism or pessimism that manufacturing companies feel about the overall business climate. It is a widely-used economic indicator, which serves as a barometer of the health of the economy from the perspective of the businesses. When business confidence in the economy is high, they make higher investments, manufacture more and save less. When confidence is low, businesses tend to be more conservative and spend less.
The business confidence is measured through a quarterly Industrial Outlook Survey (IOS) conducted by the Reserve Bank of India (RBI). The survey obtains information on business sentiments and captures qualitative responses on nine indicators - production, order books, pending orders, capacity utilization, exports, imports, employment. For each round of the survey, approx. 800-1,000 businesses are canvassed around India.
The IOS responses are measured through two indexes:
- Business Assessment Index (BAI) - Business sentiment about current business and job market conditions as compared to a quarter ago
- Business Expectations Index (BEI) - Expectations about business climate in the next quarter
Industrial Outlook is an economic indicator that measures the degree of optimism or pessimism that manufacturing companies feel about the overall business climate. It is a widely-used economic indicator, which serves as a barometer of the health of the economy from the perspective of the businesses. When business confidence in the economy is high, they make higher investments, manufacture more and save less. When confidence is low, businesses tend to be more conservative and spend less.
The business confidence is measured through a quarterly Industrial Outlook Survey (IOS) conducted by the Reserve Bank of India (RBI). The survey obtains information on business sentiments and captures qualitative responses on nine indicators - production, order books, pending orders, capacity utilization, exports, imports, employment. For each round of the survey, approx. 800-1,000 businesses are canvassed around India.
The IOS responses are measured through two indexes:
- Business Assessment Index (BAI) - Business sentiment about current business and job market conditions as compared to a quarter ago
- Business Expectations Index (BEI) - Expectations about business climate in the next quarter
SUBJECT Variables
BUSINESS ASSESSMENT INDEX (BAI)
- The business assessment index (BAI) dropped to 106.7 in Q2 '22-23 from 110.1 in the previous quarter, reflecting a softening of the overall business sentiments in the Indian manufacturing sector.
- Business conditions in the manufacturing sector moved further on the recovery path during Q2 '2022-23 as the impact of the COVID-19 pandemic ebbed further; respondents maintained positive assessment for production, order books, capacity utilisation, employment and foreign trade situations, though the sentiments were marginally tempered from the previous round of the survey.
- Manufacturers assessed continued pressures from rising cost for raw materials, salary outgo and the cost of finance during the quarter; they, however, perceived some moderation in the pace of increase in raw material cost. Respondents reported deceleration in the pace of rise in selling prices during Q2 '2022-23; their sentiments on profit margin for the quarter deteriorated.
BUSINESS EXPECTATIONS INDEX (BEI)
- The business expectations index (BEI) remained in the optimist territory though it moderated slightly to 134.4 in Q2 '22-23 from 137.5 in the previous quarter
- Respondents remained optimistic on demand conditions during Q3 '2022-23, though it waned marginally, as reflected in their expectations on production, order books and employment.
- Pressures from purchase of raw materials and staff cost are likely to soften during Q3 '2022-23.
- Selling prices and profit margins are expected to rise further; lower share of respondents expect further rise in selling prices as well as rise in profit margins during the ensuing quarter vis-à-vis the survey round.;
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