The Hindu Business Line : Business confidence index up 1.3 pc: NCAER

THE business confidence index (BCI), a barometer measuring the confidence factor of the corporate honchos, appears to be on the high with the latest index for the July-September quarter gaining 1.3 per cent to 146.0, the highest it has attained in a decade , the National Council of Applied Economic Research (NCAER) has said.

Despite volatile and escalating energy prices and plummeting profit margins, the spurt in BCI signifies "general optimism" the Council said. However, investment climate and capacity utilisation received a lower rating in this round, despite optimism about better overall economic conditions and financial position of the firm.

What is particularly noteworthy is, the political confidence index (PCI), after plummeting by 15.5 points in the last round, improved by 5.2 points at 109.2 reflecting the business community's stable outlook about the overall performance of the coalition government.

Barring consumer durables and the service sector, the rest of the sectors display strong positive sentiments. Consumer non-durables saw maximum gain in sentiment followed by the capital goods sector. Firms belonging to the Rs 10-100 crore category showed the highest gain of 11.7 percentage points in business confidence.

Stating that regional-level BCI portrayed an entirely opposite canvas as compared to the last round, the Council said that in this round, except the East, the other three regions of the country reported an upswing in business confidence.

In comparison to the previous round, nearly two per cent more firms expect sales to increase in the next six months. Around one per cent more firms in this round expect raw material costs to increase in the next three months, as compared to the previous round. As compared to the last round, a fewer number of firms believe that the ex-factory price of their products would escalate.

According to the Council, nearly 69 per cent firms believe that capital market conditions now are better than a year ago and nearly 59 per cent firms feel that their ability to raise funds for new investment from the capital market through equity has vastly improved. The same for loan/debt is 62 per cent. Only 15.7 per cent firms are contemplating about greenfield projects, 52.5 per cent firms are considering brownfield projects, while 31.8 per cent first are not thinking about any new investment at present.

In comparison to the previous round, the performance of the United Progressive Alliance (UPA) Government is seen as having improved with regard to managing overall economic growth, government finances, unemployment, providing a conducive political environment and pushing economic reforms forward.

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