The Hindu Business Line : India Inc to up investment in H2: Survey

THE Indian industry is expecting higher orders, improved capacity utilisation and increased investments in the coming period. According to the Confederation of Indian Industry (CII) Business Outlook Survey for October 2004-March 2005, majority of the companies are looking at investing more in their existing units, though the overall business confidence has slightly declined.

The survey, which covered 210 companies across sectors, revealed that 83 per cent respondents are looking at fresh capital investments in the existing business units, 74 per cent out of which would be investing over Rs 1 crore in the existing units. However, rest of the respondents (17 per cent) do not want to make more investments this fiscal year.

As for capacity utilisation during April-September this year, 70 per cent of the respondents achieved 50-75 per cent levels of capacity utilisation; whereas 25 per cent of respondents reported capacity utilisation below 25 per cent, with only 5 per cent of the respondents reporting capacity utilisation above 75 per cent.

Over the next six months, 65 per cent of respondents expect to utilise between 50-75 per cent of their capacity, 22 per cent of the respondents expect below 25 per cent of their capacity utilisation and 8 per cent expect to utilise between 75-100 of their capacity. Another 5 per cent of the respondents expect to run at above 100 per cent of their capacity utilisation, informs a CII statement.

On the value of production front, 81 per cent of the respondents foresee an increase in the value of production in the next six months, with 19 per cent expecting no change. Over the past six months, 79 per cent of the respondents experienced an increase in value of production, 20 per cent had seen no change and one per cent exhibited a decline. Majority (78 per cent) of the respondents felt that the quantum of new orders would increase over the next six months, with 21 per cent seeing no change and another one per cent stating that there would be a decline in new orders.

On the employment front over the next six months, 53 per cent of respondents said the employment levels would remain constant, whereas 42 per cent of the respondents stated that they would increase the level of employment in their companies. The remaining 5 per cent felt that there would be a decline in their workforce, adds CII.

The Business Confidence Index (BCI) has exhibited a result of 64.8 points, which shows a decline of 1.2 points over the previous period (April-September 2004). This index is constructed as a weighted average of the Current Situation Index (CSI) and the Expectations Index (EI). Breaking down the CII-BCI into its two components — the CSI and the EI, the survey revealed that the CSI has declined by 2.1 points and the EI has exhibited a minor fall of 0.8 points.

The Current Situation Index (CSI), which compares the current business conditions in relation to the previous six months, is at 63.1 points. This slight decline in CSI shows that economic growth, though quite high, was lower than industry expectations during the previous six months.

The Expectation Index (EI) reflects the Indian industry's perceptions about the performance of each company, sector and the economy in the coming six months. The Expectation Index in this survey stands at 65.7 points.

On the gross domestic product (GDP) growth front, in the current fiscal year, 37 per cent of the respondents expect GDP growth would be between 6-6.5 per cent, where as 26 per cent felt that economic growth in 2004-05 would be between 6.5-7 per cent and another 26 per cent of the respondents stated that the economy would grow between 5.5-6 per cent. The remaining 11 per cent felt that the economy would be below 5 per cent in the current year.

As for raw material prices, 89 per cent of the respondents stated that the prices of raw materials had increased in the past six months, whereas 11 per cent felt there had been no change. In the next six months, less than 70 per cent of the respondents foresee an increase in raw material prices, with 24 per cent of them saying that raw material prices would be stable and 6 per cent stating that their input prices would decline.