The Hindu Business Line : NCAER biz confidence index down 13.4 points

The business confidence index, a barometer of corporate India’s comfort zone as also the public sector, shows a fall of 13.4 points during the first quarter of the current fiscal, owing partly to seasonal component complemented by “subdued sentiments in the business sector”, the National Council of Applied Economic Research (NCAER) has said.

In its latest quarterly BCI released here on Thursday, the council said the overall BCI slipped to 137.9 points, down from the 151.3 logged in the last round, which itself was below the 157.3 mark in January 2007.

The BCI, in the first quarter (survey done in May-June) dropped from its level in the previous quarter in each of the previous three years, though the decline in the current and last year is steep, it said.

Four components

Stating that the decline in sentiment is in all four components of BCI, which is, financial position, overall economic conditions, capacity utilisation and investment climate.

The council said the lower rating of investment climate has contributed more to the fall than any of the other three indicators.

The council contends that besides the seasonal element, there are other factors swaying the sombre outlook in an otherwise strongly performing economy. It singled out one such factor as the impact of tight monetary policy on business.

Interestingly, despite a tight monetary policy, the availability of credit is not cited as a major constraint. On the contrary, there is a clear perception that credit availability has improved over the past two years.

PCI Up

However, the Political Confidence Index (PCI), the other barometer of sentiments the Business Expectations Survey attempts to capture, has revealed a slight improvement in the current round by 3.5 per cent in July 2007 over its April 2007 level.

Firms in the western region have shown a decline in PCI while all the other regions reported improvement.

Noting that firms in all the main sectors of the non-agricultural economy have shown a decline in business confidence, the council said, the capital goods and services sectors have experienced greater decline in BCI than the other sectors.

While the BCI dip is common all across the four regions, the northern region encountered greatest loss and the southern region saw the least decline. Firms of both small and big, public and private, express drop in business confidence.

Slower export growth

On trade, it said the short-term import scenario is stable and growth of exports of capital goods is projected to increase and all other exports are likely to grow more slowly than the experience of the past three months. Export growth of the services sector is expected to slow down the most.

While inventory holding has gone down and the sales order position has improved, expectations on product prices reflect lower inflationary expectations.