The Hindu Business Line : CII study shows increase in positive confidence

THE Business Confidence Index (BCI) of the Confederation of Indian Industry (CII) for the period April-September this year shows that there is an increase in the positive confidence amongst the domestic industrial community.

In a statement, the chamber has said that the BCI for April- September this year stands at 66.05 points which is an improvement of 1.15 points over the previous period (October 03-March 04). The Index is a part of the 61st Business Outlook Survey of the chamber. The Index is constructed as a weighted average of the Current Situation Index (CSI) and the Expectations Index (EI). The upward movement of the index within the 50-75 points range reflects that there is an increase in the positive confidence amongst the industrial community in the country.

The Current Situation Index stands at 65.2 and has shown a gain of 5 points over the previous period. The statement points out that this exhibits that industry perceives the present conditions to be better off than what they were six months back.

The Survey shows that most of the respondents are of the opinion that the improvement in the overall economy has been higher relative to their activity sector and their own company. The CSI for the overall economy jumped by 8.2 points, whereas the index for the activity sector and own company exhibited an increase by 3 and 5.3 points respectively.

However, the Expectation Index (EI) in the survey has dipped slightly as compared to the last survey and stands at 66.5. The survey shows that while the expectations on the overall performance of the economy have not changed, there has been a decline in expectations on the growth prospects of both the activity sector and the individual companies. The EI for own activity sector at 63.4 has dropped by 1.9 points and the index for own company at 67.9 has dropped by only 0.2 points. The statement adds that the Survey was conducted before the elections and therefore does not reflect the election results. However, speculation about election results could have had an impact on business sentiments.

On the GDP growth front, the Survey shows that in the current fiscal year 38 per cent of the respondents expect the GDP growth to be greater than 7 per cent, while 28 per cent felt that economic growth during 2004-05 would be between 6.5-7 per cent. Only 20 per cent stated that the economy would grow by between 6-6.5 per cent. The remaining 14 per cent felt that the economy would grow by less than 6 per cent in the current year. As for GDP growth in 2005-06, the majority of the respondents (70 per cent) expect that growth would remain above the 6 per cent mark.

The Survey shows that 88 per cent of the respondents foresee an increase in the value of production in the next six months. While 6 per cent of the respondents are expecting no change and an identical 6 per cent are expecting a decline.

The majority of the respondents (86 per cent) felt that the quantum of new orders would increase over the next six months, while 10 per cent felt that there would be no change and the remaining 4 per cent stated that there would be a decline in new orders in the next six months.

On the employment front, over the next six months 40 per cent of the respondents stated that they would increase the level of employment in their companies, while 49 per cent said that the employment levels would remain constant. Similarly, 11 per cent felt that there would be a decline in their workforce.

The Survey shows that the growth in exports is expected to remain robust in the next six months. The majority, 77 per cent of the exporters expect an increase in volume terms, while 14 per cent of exporters expect no change. In the next six months, 69 per cent of the respondents foresee an increase in the value of exports in dollar terms, while 17 per cent foresee no change and 13 per cent felt that the value of exports for their company would decline.

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