labels: Confederation of Indian Industry, Industry - general
Business Confidence improves, says CII's Business Outlook Survey news
14 May 2009

According to CII's bi-annual Business Outlook Survey, CII Business Confidence Index (CII-BCI) for April-September 2009-10 improved considerably reflecting a boost in business confidence compared to the past six months.

CII-BCI recorded at 58.7 for April Ė September 2009-10, reflecting an increase after two consecutive periods of decline. ''The rise in the index reflects better expectations for the coming six months and confirms our belief that the worst is likely to be over for the economy'', said Mr. Chandrajit Banerjee, Director General, CII. However, uncertain global economic outlook and slackening consumer demand still remain major concerns for the business community.

The CII-BCI is constructed as a weighted average of the current situation index (CSI) and the expectations index (EI). The CSI that reflects current business conditions has lost 2.5 points for the period April-September 2009-10 when compared with the previous six months. When compared to the corresponding period last year, the CSI is down 6.9 points, reflecting a decrease in current business sentiments due to the global financial and economic slowdown.

The EI that reflects the expectation of Indian industry with regards to performance of their company, sector and the economy for the period April-September 2009-10 gained 4.9 points compared to the second half of 2008-09. In fact, the EI for the first half of 2009-10 is the same when compared to the EI during the corresponding period of last year.

The CII survey, which is based on a sample size of 374 companies, revealed that 83 per cent of the respondents expect GDP growth for the year 2009-10 to exceed 5 per cent with the majority expecting it to be between 5 and 6 per cent.

On inflation, 86 per cent of the respondents expect inflation to be above 2 per cent in 2009-10, thereby ruling out the possibility of sustained deflation in the economy. Given the ongoing global slowdown, 96 per cent of the respondents feel that it is only in the second half of 2009-10 and beyond, that the Indian economy would witness a turnaround and begin returning to normal growth.

The prospects for investment, capacity utilization, production, employment and exports as elements that build up the business confidence were also looked into by the survey. The survey revealed that 30 per cent of the respondents plan to increase investments during April-September 2009-10.

Capacity utilisation has improved: 50 per cent of the respondents revealed that capacity utilization for April-September 2009-10 is expected to be in the range of 75-100 per cent compared to 39 per cent of respondents who said that capacity utilisation is currently in that range. The CII survey revealed that 23 per cent of the respondents expect the inventory levels to increase, lower than the 33 per cent that reported an increase for the past six months.

According to 50 per cent of the respondents, the value of production is expected to increase in the next six months. Further, increase in production is likely because of expected increase in new orders. 52 per cent of the respondents expect new orders to increase in the next six months, compared to about 30 per cent of the respondents who revealed that new orders had increased in the second half of 2008-09.

On exports, 36% of the respondents expressed confidence in expansion of exports for the period April-September 2009-10. Regarding procedural delays, 95% of the respondents felt that the delays have not reduced. This has been a long-standing hurdle for exporters, which raises transactions costs and needs to be addressed urgently.

The CII Business Outlook Survey also asked respondents about their main concerns, such as global economic instability, high interest rate, cost and availability of labour, infrastructure and institutional shortages, currency risks, slackening consumer demand, cost of compliance, surge in imports and risk of deflation. The average score of responses revealed that global economic instability is the top concern followed by slackening consumer demand and currency risks.

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Business Confidence improves, says CII's Business Outlook Survey