The Hindu Business Line : Biz confidence of India Inc bounces back

Snapshot
The maximum gain in business confidence was noticed in capital goods and services sectors.
Region-wise, the gain was more discernible in the western region, where the BCI has increased by 11.5 points.

Our Bureau

New Delhi, Dec 3 The sliding business confidence index (BCI) of corporate India, noticeable over six months, appears to have reversed in the second quarter of the current fiscal, as evidenced by the latest survey of the National Council of Applied Economic Research (NCAER).

Survey

In its 62nd round of business expectation survey (BES) released by the Council here on Monday, the business confidence index witnessed “across-the-board increase” and a rebound by eight points, thereby, reversing the sliding trends in business confidence of corporate India noticed in the 59th and 60th rounds.

Stating that three of the four components of BCI contributed to this resurgence in confidence by industry, the Council said these include perceptions on the overall economic conditions prevailing over the next six months, projections on the financial position of the firm in the next six months and investment climate in the economy now as compared to six months in the past.

Confidence

The maximum gain in business confidence was noticed in capital goods and services sectors (13.5 points and 13.3 points respectively) which also saw major decline in the previous quarter’s survey. The consumer non-durable sector, on the other hand, has experienced a minimum gain of 2.7 points. Consumer durables and intermediate goods have gained 7.4 and 7 points respectively.

While small and big firms expressed higher business confidence, public sector firms still displayed a decline and the private sector firms showed increased business confidence. Across all sectors, there has been a rise in the percentage of firms expecting domestic sale and production to rise. Yet, the consumer durables sector displays lower optimism.

Pessimism in exports

Predictably there is a greater pessimism on the export front, though strong rupee has tilted purchases of raw materials by firms in favour of imports.

A larger proportion of firms expect import raw materials to rise. Surprisingly, it is the consumer durable goods producers who are looking to export markets in a bigger way than others.

“The continued appreciation of the rupee against the dollar, the excess domestic demand pressures and so vibrant export market are acting as disincentives”, it noted.

Gains

Region-wise, the gain is more discernible in the western region, where the BCI has increased by 11.5 points.

The southern and northern regions observed gains of 5.8 and 4.1 points respectively and the east gained 7.9 points.

On the prospects of pre-tax profits, optimism is more uniform with a larger proportion of firms anticipating pre-tax profits to rise in the next six months as compared to the proportion in the first quarter survey.

Cost front

On the cost front, there were little pressures in the last three months. But a large proportion of firms expect costs to go up to 2.5 per cent in the next six months. But the cost increase is unlikely to translate into rise in the prices of manufactured products the Council said.

The political confidence index rose by a hefty 14.9 points over the previous round on the back of decline in inflation rate, though the stronger rupee has been held against the policies.

The survey found that the availability of labour for augmented level of operations is felt to be a constraint by a larger proportion of firms than for the current level of operations.

Skilled and managerial classes are in short supply but unskilled labour is not. The constraints are more binding now than six months back, the Council said.