Indian economy is expected to fare better in the second half of the current fiscal backed by uptick in sales and improved capacity utilisation, though fresh investments and new jobs creation may be a concern going forward, according to an Assocham report.
Besides, an increased spending on infrastructure development, largely by the government, is seen as the most important driver for a turnaround in the economic outlook for the period between October and March this fiscal, it added.
Over 66 per cent respondents polled in the Assocham Bizcon Survey expected improved sales and capacity utilisation during the second half of the fiscal, but remained uncertain on fresh investments coming in.
However, in the short horizon, the survey indicates that there will not be any change in the employment scenario in the industry. As majority (55.6 per cent) of respondents believe that employment condition will not improve in the coming days.
Besides, 38.9 per cent of the respondents feel that their profits may not change in the short term, October to December.
The second best driver for the optimistic outlook are effective policy reforms followed by a stable foreign exchange rate of the Indian currency despite global head winds like uncertainty on account of the Federal Reserve’s next policy move and the most bitterly fought US Presidential elections.
While a big chunk of Bizcon Survey participants felt the present economic situation appears to be in a better shape than the previous six months on several parameters, the optimism is more pronounced for the second half of 2016-17.
“Good thing is, there is a clear turnaround in business confidence, which holds the key to new investment and consumer confidence,” Assocham President Sunil Kanoria said.
He said unlike the previous surveys, the latest round indicates a slight uptick even with regard to capacity utilisation going forward and the order book. However, generation of new employment and improvement in wages is still some distance away.
The confidence was quite pronounced at the level of individual firms’ level, as about 89 per cent of the respondents expressed optimism about better days ahead.
The majority (55.6 per cent) of the respondents feel that there is an increase in sales volume during September quarter and also expect more sales during October-December 2016. “The power to increase price on the part of producers and service providers would remain constrained till there is some more improvement in the consumer demand,” Kanoria said.
In terms of the wage costs scenario, the majority of the industry (44.4 per cent) opines that in the July to September 2016, there is no change in wages costs. Moreover, half of the respondents felt that wage costs will not change in the near future.
The economy grew at the slowest pace in last six quarters at 7.1 per cent in April-June this fiscal, mainly on subdued performance of mining, construction and farm sectors.
The Reserve Bank expects the economy to grow 7.6 per cent in the current fiscal. The Bizcon Survey did not give an estimate of economic growth in the coming quarter.
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