The Hindu Business Line : Business confidence index slips by 3.4%: NCAER survey

Business Confidence Index (BCI), the barometer for measuring the moods of the country’s corporate sector, saw a dent in optimism due to financial market volatility, with the BCI slipping from 154 in the previous survey of January 2008 to 148.7 in the post-budget round or a decline of 3.4 per cent.

In the latest quarterly review of business expectations survey released here by the National Council of Applied Economic Research (NCAER), it was stated that the 2008-09 Union Budget was presented at a time when financial market volatility, inflationary pressures and deceleration of the growth rate were beginning to cast a shadow over the prospects of economic expansion in the new fiscal year.

Stating that in the latest round of the survey there is a widespread decline in business expectations across sectors, regions and size and categories, the Council said the decline could be detected in the overall assessment of the economy over the next six months, financial position of the firms over the next six months and present investment climate.

However, the capacity utilisation indicator continues to hold on to the level seen in the previous survey.

The dip in sentiment is spread across three of the five major sectors — consumer durables, intermediates and services — compared with near-stagnant levels of BCI in the case of non-durables and capital goods. Compared with three months ago, all regions of the country barring the East, manifested less confidence in the extant business conditions.

Though there is a decline in three out of four categories in the smaller size groups, the improvement in BCI in the largest size group (Rs 500 crore) is a significant departure from the general pattern.

Across ownership categories, there is a decline, about 5 per cent, in BCI for all the cases, with the exception of “individually owned/partnership firms” which show an improvement of 2.9 per cent.

The growth of sales and production over the next six months might be slower than the expectations voiced in January, it said, adding that “one would have expected import growth to remain strong due to rupee appreciation. Much the same sentiment is extended to the case of the raw materials import growth rate”.

The industrial sector has encountered a rising cost of raw material in the past three months. The expectations for the next six months are similar, it added.

Political confidence index

The Council said the political confidence index for the quarter has dropped sharply by about 17 per cent from 127.7 in January 2008. On the Budget, it said that taken together with the general satisfaction concerning the tax rate proposals, the impact of the budget on investment plans seems to be moderately positive, it added.