The Hindu Business Line : NCAER survey shows spurt in business confidence index

THE United Progressive Alliance (UPA) Government, hobbled by Left Parties supporting from outside, might suffer from reform hiccoughs, but corporate India does not have any such fear, as almost 50 per cent of the firms surveyed by the premier think-tank National Council of Applied Economic Research (NCAER) feel that the present Government would perform better on the economic reforms front over the next six months.

In its latest business confidence index (BCI) survey to reflect the corporate confidence barometer with the authorities, NCAER said that after slipping in July 2004, the BCI bounced back in the latest round to reach 136 in October 2004. The spurt in business optimism in the latest round reflects a host of positives on the economy.

"A higher industrial growth, better than expected global recovery and a greater clarity about the economic agenda of the UPA Government, all appears to have contributed towards the swing in the business optimism," the Council noted.

All the four major components of BCI - overall economic conditions, investment climate, financial performance of the firms and capacity utilisation - have received higher ratings in this round as compared to the previous round.

Firms in the capital goods sector are the most sanguine, followed by firms in the consumer durables sector, with the former showing an increase of over 16 per cent in BCI in this round as compared to the previous round. Across the regions, firms in the East and West are more optimistic as compared to the firms in the North and South.

A relatively high proportion of firms belonging to consumer durables and non-durables sectors as compared to the firms of other sectors are obtaining short-term loans at a lower rate of interest. The expected change in costs and prices over the next six months is one of moderate increase in cost of production but stable output prices, the Council said.

Of the four components, the two major contributors towards the improved business outlook for the public sector firms include the financial position and the investment climate. This is the second successive quarter in which the business sentiments of the public sector firms have seen an upward revision.

The renewed emphasis of the UPA Government on restructuring of some of the ailing public sector units (PSUs) and greater autonomy to the PSUs that are doing well might presumably be the reason behind their higher business confidence in the latest round, the Council observed.