CII Business Confidence Index at a two-year high in Oct-Dec

The latest CII Business Confidence Index for the October-December quarter rebounded to its highest reading in almost two years of 67.6 from 62.2 in the previous quarter, reflecting optimism around India being in a sweet spot despite the rising global uncertainties, the industry body said on Sunday (January 15).

The sharp improvement in the value of the index was buttressed by the subsiding of concerns around the impending recession and its impact on the Indian economy, CII stated.

The Index is based on the findings of a survey of over 120 firms of varying sizes across all industry sectors and regions of the country.

However, a majority (70 per cent) of the survey respondents feel that the Indian economy will expand in a range of 6.5 per cent to 7.5 per cent in the current financial year ending March from 8.7 percent in the last fiscal.

‘Critical that interest rates do not rise any further’

“Growth is expected to moderate further in the next year on global headwinds. Hence, to support growth, it is critical that RBI refrains from raising the interest rates any further,” the Confederation of Indian Industry stated.

The latest first advance estimate of GDP for the current fiscal is 7 per cent. Nearly half of the respondents (47 per cent) indicated that they had already started feeling the impact of the policy rate hikes by the RBI on the overall economic activity, revealed the survey.

Also read: CII urges Centre to reduce personal income tax to spur economic activities

High-interest rates have impinged on private investment levels too. Currently, most of the heavy lifting to support growth was being done by public Capex, with private Capex playing a supporting role, said CII.

Even as global economic growth is witnessing headwinds due to tightening financial conditions and geopolitical tensions, an overwhelming 73 per cent of the survey respondents expect only a moderate impact on the Indian economy. The confidence among respondents stems from the fact that 86 per cent believe the government’s focus on infrastructure is the biggest positive for the Indian economy, followed by improvement in tax collections and good consumption recovery, said CII.

In addition to high borrowing costs, the prevailing heightened uncertainty has prevented firms from furthering their investment plans.

Encouraging prognosis 

The survey results, however, present an encouraging prognosis with 90 percent feeling that their company’s investment cycle will recover during the next fiscal.

Around 52 per cent expect recovery during the first half of the next fiscal while about 37 percent of them foresee a pickup in investments by the second half of the year. Nearly half of the survey respondents feel that the capacity utilization levels in their companies would range between 75-100 per cent during the Oct-Dec quarter.

Also read: Despite global headwinds, Indian economy will stay on course: FM Sitharaman

It is encouraging to note that given its bearing on the overall economy, a recovery in the rural demand is eagerly awaited and about 60 per cent of the respondents feel that a pick-up in rural consumption will take place in the next fiscal, said CII.

With a resumption of business activity, expectations for the Oct-Dec quarter have improved as the majority of the respondents anticipate an increase in sales (60 per cent) and a count of new orders (55 per cent).

Consequently, the profit outlook for the quarter has strengthened as nearly half of the respondents (47 per cent) foresee an increase in profit margins, despite the majority of them indicating high input costs. Nonetheless, input price pressures, though still elevated, have moderated from the previous fiscal, with 51 per cent of the respondents expecting raw material costs to remain elevated during the Oct-Dec quarter as compared to 59 per cent in the previous quarter, CII said.

(With Agency inputs)