Hyderabad: According to Dun & Bradstreet (D&B), the outlook for the Indian economy remained buoyant, though the risks of rising interest rates and appreciating rupee remain.

Kaushal Sampath, CEO, D&B India Private Limited, said, that while business confidence is difficult to predict over the long term, "we remain confident over the long term growth prospects of the Indian economy. The Indian economy continues to look optimistic; latest growth estimates reveal that GDP grew by 8.6 per cent during the third quarter of financial year 2007," he said.

He, however, added, that during the next quarter, business confidence would be determined by movements in inflation and the monetary policy stance of the RBI (Reserve Bank of India).

Sampath also said it would it difficult to quantify the exact impact of the appreciation of the rupee on the Indian economy.

"Theoretically, the appreciation of the rupee will make our exports more expensive and therefore less competitive. At the same time, imports will become cheaper. We need to wait and watch the RBI''s stance with respect to the rupee appreciation," he said.

The industrial sector has also continued to display a healthy performance. The index of industrial production (IIP) grew by 12.9 per cent in March 2007, taking the cumulative IIP growth for the fiscal year to a 10-year high of 11.3 per cent.

The capital and intermediate goods sectors have also registered impressive growth rates of 13.2 per cent and 13.3 per cent respectively in 2007 — an indication of continued robustness. Industrial production is therefore likely to continue with its current momentum.

However, he pointed out that interest rate hikes and an appreciating rupee remained a downside risk. Growth in the consumer durables has slowed down to 9 per cent in 2007, as compared with 15.3 per cent in the previous fiscal. A high base effect on the growth of consumer goods was evident, but nevertheless the impact of rising interest rates could not be completely ruled out.

During the first quarter of the current fiscal (April-June 2007), the composite Business Optimism Index (BOI), which the RBI frequently quotes in its monthly bulletin, stood at 201.2 points, recording an increase of 3.4 per cent on a quarter-on-quarter basis. On a year-on-year basis, the BOI recorded an increase of 13.3 per cent.

The D&B BOI is barometer of the business community''s expectations with regard to certain key parameters.

Four of the six optimism indices, namely volume of sales, net profits, selling prices and new orders have decreased as compared to the previous quarter. The capital goods and intermediate goods sectors were the most optimistic, particularly with regard to order book positions. The consumer durables sector, on the other hand, seemed the least optimistic with regard to most parameters.