The Hindu Business Line : `Business confidence low in Jan-March quarter'

Key Indicators
The survey points out that the BCI fell in all four of its main components.
There is likely to be an increase in demand for both managerial and unskilled labour.

New Delhi May 4 The Business Confidence Index (BCI) and the Political Confidence Index (PCI) for the January-March quarter this year fell by 3.8 per cent over the previous quarter.

According the `Quarterly Review 2007 Business Expectations Survey' published by the National Council of Applied Economic Research (NCAER), the BCI slipped from its level of 157.3 points in the previous quarter fell to 151.3 points.

The survey points out that the BCI fell in all four of its main components — overall economic conditions, investment climate, financial positions of firms and capacity utilisation. The survey further states that the perception of firms on the current investment climate has seen the steepest fall.

"While all the macroeconomic corporate performance indicators appear robust, the tightened monetary conditions designed to contain the inflationary effects of the economy may have led to the decline in the BCI," the survey observed.

Another startling highlight was that the BCI has seen a decline in all the sectors. While the capital goods sector showed the least decline, the intermediates sector showed the highest BCI decline.

No region spared

No region was spared of the BCI decline. Among the four regions of the country, the Western and Southern regions have seen a greater loss in business confidence. The loss in BCI, however, does not imply any decline in the key performance indicators of firms. The production, domestic sales, exports, imports and profits are all expected to increase in the next six months, the report said.

The survey also indicated that there is likely to be an increase in demand for both managerial and unskilled labour in the short run. The PCI has followed the BCI in its downturn, with all the sectors having expressed lower political confidence during the quarter.

The survey points out that all aspects of the economy, save external trade, threw up lower rating for the political managers that the experience in the last round.

However, there have been variations in the assessment. According to the survey, a larger proportion of the sample firms from the Western and

Northern regions have expressed greater confidence in the political management of the economy in the current round than in the previous round.