The Hindu Business Line : Business Confidence Index down 8 pc, says NCAER

Drop in ratings
The ratings of the macroeconomic indicators such as overall economic conditions and the investment climate dropped to 66 and 66.5 respectively, that is, by 12.4 and 4.3 percentage points, respectively, over their levels in the previous round.

New Delhi , July 25

The quarterly review of the Business Confidence Index (BCI) conducted by the National Council of Applied Economic Research (NCAER) shows that the BCI for April-June 2006 decreased by 8 per cent over its previous round, and reached 141, which is the lowest since January 2005, according to an official release.

There is also a sharp decline in the Political Confidence Index (PCI) by 30.6 per cent, touching its lowest point in the last six rounds. The rating on all the components of the political index is lower.

Except in the East, the PCI is down in all the other regions. Political stability and pro-reform policies in West Bengal may have played a crucial role in raising the index by 14 per cent in an otherwise poor assessment, the release said.

The ratings of the macroeconomic indicators such as overall economic conditions and the investment climate dropped to 66 and 66.5 respectively, that is, by 12.4 and 4.3 percentage points, respectively, over their levels in the previous round.

Among the firm-level indicators, expectations regarding the financial position exhibited a decline of 4 per cent while capacity utilisation showed a mild dip.

All the sectors have shown a drop in expectations. The decline in business expectations has been highest in the capital goods sector (-13 per cent), followed by intermediates (-8 per cent) and consumer non-durables (6 per cent). The services sector, considered to be the engine of growth, too has receded by 5 per cent over its previous round. The least decline in expectations is noticed in the consumer durables sector, which went down by 1.4 per cent.

East bucks the trend

Except for the East, all other regions have shown a decline in business sentiment. The sentiments in the West and in the North declined significantly to the tune of 17 per cent over the previous round, while the South saw a drop of slightly over 4 per cent.

Expansion of industrial activity in West Bengal exemplified by the proposed private sector investment in motor vehicles and retail businesses may have spurred the positive business sentiments there, and the regional index recorded about an 8 per cent rise over the previous round.

Across size classes, the sentiment declined steeply for the top category of firms. The BCI for the firm size having a turnover of more than Rs 500 crore is lower by 17 per cent, followed by the size class of Rs 10 crore to Rs 100 crore, which saw a dip of 13.3 per cent.