The Hindu Business Line : Business confidence up, says NCAER survey

THE Business Confidence Index (BCI), the barometer of corporate mood monitored by the National Council of Applied Economic Research (NCAER), is higher by 4.7 percentage points in April 2004 over its level in January 2004. The upswing in the BCI is indeed "a reflection of the feel-good factor that is currently sweeping the economy," the Council said here.

NCAER's quarterly Business Confidence Index scaled to 142.8 in its latest survey, which is an impressive 22.9 percentage points higher than the BCI registered in April 2003.

This is also the highest level BCI has attained since December 1995. The reason for such an upswing in business sentiment is clearly entrenched in the growth performance of industrial sector.

The Council said the industrial growth led by manufacturing segments such as automobiles, steel, cement, edible oil, refrigerator, motorcycle now appear much more broad-based.

More heartening is the recovery in capital goods sector, which has witnessed a growth of 11.9 per cent during April to February 2003-04.

Stating that all the four components of BCI - expectations from the overall economic conditions, expectations from the company's financial position, the current investment climate and the current level of capacity utilisation -

in this round, once again demonstrate improvement, the Council said while the indicators of overall economic conditions and financial position are up by 1.3 and 3.6 percentage points respectively, the indicators of investment climate and capacity utilisation are up by 2.6 and 1.7 percentage points respectively.

The firms belonging to the Southern region have upgraded their expectations on all the four parameters of BCI in this round.

But in the case of North, rise in BCI is mainly linked to the upswing in financial position and investment climate.

While across the sectors consumer non-durable is most optimistic, across the regions West appears to be most optimistic about the business prospects.

When it comes to the various size classes of firms, the highest rise in the confidence level in this round has been displayed by the firms belonging to the size class of Rs 100 crore to Rs 500 crore.

One major upset tangible in the current round of the survey pertains to the public sector companies.

With the exception of investment climate, they have lowered the ratings for all the other three parameters of BCI in this round.

The current revival of capital market has made a positive impact on the ability of firms to raise resources from the market. While about 49 per cent of the firms report that their ability to raise equity capital from the capital market has increased, an even higher 75 per cent of the firms report that their ability to increase resources through loan/debt route has gone up.

The Council survey reveals that while about 56 per cent of the firms report that the resources raised from the capital market are intended for brown-field projects, 22 per cent report that these are for green-field projects. It said firms are more optimistic on the sales front in this round, but their expectation about exports during the next six months is somewhat subdued.

Hiring of workforce, as also the wages are likely to go up during the coming six months and the general expectation is that the interest rate on all types of loans would fall during the coming months. More of the larger firms as compared to the smaller firms are expecting their expenditure on information-technology and related equipment/software to go up in the coming six months.