labels: Confederation of Indian Industry
CII's business survey expects GDP growth at above 8 per cent, investments to to rise in H1 2008-09 news
26 May 2008

New Delhi: Business confidence for April - September 2008-09 HAS moderated on concerns of global economic uncertainties, high interest rates and availability and cost of labour, said CII's 69th Business Outlook Survey. The CII survey, however, pointed out that outlook for GDP growth is expected at 8 per cent  plus and investments are expected to be on track.

CII's Business Confidence Index (CII-BCI) for April-September 2008-09 moderated by 5.3 points when compared to the past six months. The CII-BCI, constructed as a weighted average of the current situation index (CSI) and the expectations index (EI), was higher among the manufacturing firms (61.4) as compared to non-manufacturing firms (60.5) engaged in provision of services.

The CSI that compares current business conditions has lost 3.1 points for the period April-September 2008-09 when compared with the previous six months and about 2.9 points compared to the corresponding period of last year. This reflects the sentiments related to decline in growth of industrial production, said CII.

The EI that reflects the perceptions of Indian industry with regards to performance of their company, sector and the Indian economy for the period April-September 2008-09 lost 6.4 points over the first half of the current financial year reflecting lower expectations in terms of performance during the first half of 2008-09.  However, the EI for first half when compared to the corresponding period last year is actually down by 2.9 points.

The CII survey also revealed that 67 per cent of the respondents plan to increase investments during April-September 2008-09. Capacity utilization across the board has increased and 50 per cent  of the respondents expect capacity utilisation for April-September 2008-09 would be in the range of 75-100 per cent. While expectations on capacity utilisation are normal, inventory levels are on higher side. The CII survey revealed that 40 per cent  of the respondents expect the inventory levels to increase. This is marginally higher when compared to the previous survey.

The value of production is also expected to increase in the next six months. This was revealed by 73 per cent of the respondents. In fact, 66 percent of the respondents reported that production increased in the second half of 2007-08. Further increase in production is expected due to expected increase in new orders in the first half of 2008-09. About 66 per cent of the respondents expected new orders to increase in the next six months, while about 63 per cent of the respondents revealed that new orders had increased in the second half of 2007-08.

Keeping in line with expected increase in production, employment is also expected to increase in the second half of this financial year. This was revealed by 49 per cent  of the respondents, who expected employment to increase during April-September 2008-09. According to the CII survey employment had increased during the period October-March 2007-08 as revealed by 51 per cent  of the respondents.
 
On exports, 63 per cent  of the respondents expressed confidence in exports expansion for the period April-September 2008-09. While 52 per cent  of the respondents revealed that exports had increased during October-March 2007-08, 91 per cent  of the respondents felt that the procedural delays have not reduced. This has been a long-standing hurdle for exporters, which raises transactions costs and needs to be addressed urgently, said the CII survey.

CII Business outlook survey also asked respondents about their main concerns, that affect growth prospects, such as global economic instability, high interest rate, cost and availability of labour, infrastructure and institutional shortages, cost of finance, slackening consumer demand, cost of compliance and surge in Import. Weighted average score of respondents revealed that global economic instability has been the top concern followed by high interest rate and cost and availability of labour.

The survey also revealed that 62 per cent  of the respondents expect global economic uncertainty to impact their company's earnings. In order to minimize the negative impact, 33 per cent  of the respondents think that interest rate should be reduced to boost investment and consumer demand while 28 per cent  of the respondents felt that diversification of export market would help counter possible impact of US economic slowdown on their exports.


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CII's business survey expects GDP growth at above 8 per cent, investments to to rise in H1 2008-09