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Industry and Infrastructure 273

8.10 Another indication of optimism about the economic performance is the RBI’s Business
Expectation Index (BEI). This index gives a glimpse of the demand conditions in the manufacturing
sector by combining parameters which include overall business situation, production, order
books, inventory of raw material and finished goods, profit margin, employment, exports and
capacity utilization. BEI remained stable with only a slight downturn in the second quarter
of 2020-21 owing to the onset of the pandemic in the first quarter of that year (figure 10).
Since then, it has been on an upswing. It increased to 124.1 in theQ2:FY22 and to 135.7 in
the Q3: FY22 as compared to 119.6 in the first quarter of the same year. The uptick in the data
suggests that the manufacturers perceive further improvement in overall business situation in
Q3:FY22; and exhibit optimism for Q4:FY22. Capacity utilization and employment conditions
are expected to improve.

Figure 10: Manufacturing Index and Business Expectation Index

150.0
140.0
Value of Indices 120.0
130.0
110.0
100.0
90.0
80.0
70.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019-20 2020-21 2021-22

BEI Manufacturing index

Source: Survey calculations based on data from MOSPI and RBI

GROSS FIXED CAPITAL FORMATION

8.11 Gross fixed capital formation (GFCF) is the gross addition to fixed assets like machinery
and equipment, intangible assets and indicates the state of investments in the economy. During
2019-20, the share of industrial sector in total GFCF in the economy (at current prices) was
recorded at 30.1 per cent, which is slightly lower than 31 per cent in the previous financial year
(Figure 11). Within the industrial sector, the share of manufacturing in GFCF was 51 per cent,
followed by electricity at 23 per cent, construction at 21 per cent, and mining with 5 per cent.
While aggregate GFCF (at constant prices) grew by 9.9 per cent and industrial GFCF grew
by 12.4 per cent in 2018-19, it grew by 5.4 per cent and 3.7 per cent respectively in 2019-20
(Figure 12). During 2019-20, GFCF in the mining and electricity sectors registered a negative
growth of 12.9 per cent and 6 percent respectively, but the GFCF grew by 10.2 and 4.4 percent
in the manufacturing and construction sector respectively on y-o-y basis.