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 Business Confidence Survey / Methodology


Business Confidence Survey (BCS)-Index Construction


1. Computation of the Diffusion Index

The results of Business Confidence Survey (BCS) are reported in the form of Diffusion Index (DI). The Diffusion Index shows the general tendency of respondents about a certain aspect of a particular survey. The questionnaire for this survey offers following five types of options to the respondents for their views on each question.

Sr. No. Answer Options Assigned score
1 PP = Very positive 1
2 P = Positive 0.5
3 E = Unchanged/neutral 0
4 N = Negative -0.5
5 NN = Very negative -1

On the basis of these five options, the Diffusion Index is computed in the following two steps:

Step 1: Net Response (NR) is computed as below:

NR = {(1.00 * PP) + (0.05 * p) + (-0.50 * N) + (-1.00 * NN)}

Step 2: The diffusion index is computed as follows:

DI = (NR + 100)/2

2. How to interpret the index?

The diffusion index ranges from the minimum value of 0 to the maximum value of 100 i.e. a value of 50 is indicative of neutrality, 0 no confidence and 100 indicates extreme confidence. So in general:

  • DI > 50 indicates that Positive views are more than Negative views;
  • DI = 50 indicates that Positive views and Negative views are equal;
  • DI < 50 indicates that Positive views are less than the Negative views

We report diffusion index for each question; the composite indices such as Current Business Confidence Index (CBCI), Expected Business Confidence Index (EBCI), Business Confidence Index (BCI) and Purchasing Managers Index (PMI) are averages of selected questions. In addition, overall economy wide indices are computed by taking weighted average of industry and services sector indices. The weight assigned to each sector is based on its share in the Non-Agricultural GDP.

3. Questions used for different Indices

Index Question description
Current Business
Confidence Index
 - The general economic conditions in the country over the past six months have
 - Excluding normal seasonal changes, your production over the past six months has
 - Excluding normal seasonal changes, the total number of employees at your firm over the past six months has
Expected Business
Confidence Index
 - You expect the general economic conditions in the country in the next six months to
 - Excluding normal seasonal changes, you expect your production in the next six months to
 - Excluding normal seasonal changes, you expect the total number of employees at your firm in the next six months to
Expected Business
Confidence Index
 - The general economic conditions in the country over the past six months have
 - You expect the general economic conditions in the country in the next six months to
 - Excluding normal seasonal changes, your production over the past six months has
 - Excluding normal seasonal changes, you expect your production in the next six months to
 - Excluding normal seasonal changes, the total number of employees at your firm over the past six months has
 - Excluding normal seasonal changes, you expect the total number of employees at your firm in the next six months to
Purchasing Manager Index
(for industry only)
 - Excluding normal seasonal changes, your production over the past six months has
 - Excluding normal seasonal changes, the total number of employees at your firm over the past six months has
 - Excluding normal seasonal changes, your total order books over the past six months have
 - In the past six months, the quantity of raw material purchases has
 - Average supplier delivery times over the past six months has

 

 


       
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