CII Business Confidence Index rebounds sequentially in Q1

Business confidence improved sequentially in the first quarter of this fiscal on the back of increased macro stability of the Indian economy, which has improved business sentiments, the findings of the latest CII Business Outlook Survey showed.

As against a reading of 64 in the previous quarter, the 123rd Business Confidence Index (CII-BCI) came in at 66.1 in the first quarter of this fiscal. However, the latest reading of 66.1 remained lower than 66.9 in the same quarter last year.

Commenting on the latest findings of the Survey, Chandrajit Banerjee, Director General, CII, said, “The positive momentum seen in CII Business Confidence Index in the first quarter of the current fiscal is encouraging and reiterates the on-ground experience of most of the industry players. The improvement in demand has translated into an improvement in capacity utilisation in many sectors, which will lend further impetus to private capex this year”.

The 123rd round of the Business Outlook Survey was conducted during May-June 2023 and saw the participation of more than 180 firms of varying sizes across all industry sectors and regions of the country. Sixty-four per cent of firms belonged to the MSME sector.

“The Indian economy stands as a beacon of growth amidst choppy global scenario buttressed by softening inflation and government capex. While the lagged impact of RBI’s rate hikes will take some bite off growth, well capitalised financial system and healthy corporate balance sheets will support growth”, Banerjee added.

GDP GROWTH 

Most respondents (63 per cent) expect GDP growth to come in a range of 6.0-7.0 per cent in the current fiscal, broadly in line with the 6.5 per cent forecast of RBI and other multilateral agencies. 

Though growth is expected to decelerate in the current fiscal from 7.2 per cent in the previous year, bulk of it is attributed to global headwinds and uncertainties. 

• Read: India’s services sector growth eases to three-month low in June: PMI

PRIVATE CAPEX 

An overwhelming majority of respondents (65 per cent) believe that the fresh sightings in private investment will be sustained in the current fiscal. 

Several factors are driving private capex, such as deleveraged corporate balance sheets, which have increased the corporates’ capacity to invest once there is clear visibility on demand.

There are already signs of an increase in capacity utilisation of the respondent companies, with more than half (52 per cent) expecting it to stand in a range of 75-100 per cent in the Apr-June quarter, up from 45 per cent number in the previous quarter.

STICK WITH INTEREST PAUSE

The survey results also show that 62 per cent of respondents expect muted global growth and geopolitical turbulence as the key business concerns in the current fiscal.

The RBI needs to stick with a pause on the interest rate to preserve the growth impulses. This was emphasised in the survey results, as 53 per cent of the respondents expected the RBI to maintain status-quo on the key interest rates in the fiscal first half.

The interest rate pause by the RBI is expected to bring down the cost of capital for India Inc, thus fuelling fresh investments and giving private capex a further leg-up, according to CII.

EMPLOYMENT PICK UP

The survey results present an encouraging prognosis on the employment front, with nearly half of the respondents (47 per cent) expecting an increase in employment in the first quarter of the current fiscal (Q1FY24) as compared to the actual number of 43 per cent in the previous quarter.

Mirroring the improvement in business sentiments, expectations for the Apr-June quarter FY24 have also turned sanguine, with majority of the respondents anticipating an increase in sales (55 per cent) and count of new orders (57 per cent). Consequently, the profit outlook for the quarter has strengthened as over one-third of the respondents (38 per cent) foresee an increase in profits, despite majority of them indicating high input costs.

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