CII Business Confidence Index Rebounds To Two-Year High In October-December Quarter

The Index is based on the findings of a survey of over 120 firms of varying sizes and across all industry sectors and regions

<div class="paragraphs"><p>(Source:&nbsp;<a href=";utm_medium=referral&amp;utm_content=creditCopyText">Isaac Smith</a>/ <a href=";utm_medium=referral&amp;utm_content=creditCopyText">Unsplash</a>)</p></div>
(Source: Isaac Smith/ Unsplash)

The latest CII Business Confidence Index for the October-December quarter rebounded to its highest reading in almost two years of 67.6 from 62.2 in the previous quarter, reflecting optimism about India being in a "sweet spot" despite the rising global uncertainties, the industry body said on Sunday.

The sharp improvement in the value of the index was buttressed by the subsiding of concerns around the impending recession and its impact on the Indian economy, the CII stated.

The Index is based on the findings of a survey of over 120 firms of varying sizes across all industry sectors and regions of the country.

However, a majority (70%) of the survey respondents feel that the Indian economy will expand in a range of 6.5% to 7.5% in the current financial year ending March from 8.7% in the last fiscal.

"Growth is expected to moderate further in the next year on global headwinds. Hence, to support growth, it is critical that RBI refrain from raising interest rates any further," the Confederation of Indian Industry stated.

The latest first advance estimates of GDP for the current fiscal put the GDP print at 7%.

Nearly half of the respondents, i.e., 47% have indicated that they have already started feeling the impact of the policy rate hikes by the RBI on the overall economic activity, revealed the survey.

High interest rates have impinged on private investment levels too. Currently most of the heavy lifting to support growth is being done by public capex, with private capex playing a supporting role, said CII.

Even as global economic growth is witnessing headwinds due to tightening financial conditions and geopolitical tensions, an overwhelming 73% of survey respondents expect only a moderate impact on the Indian economy. The confidence among respondents stems from the fact that 86% believe the government's focus on infrastructure is the biggest positive for the Indian economy, followed by improvement in tax collections and good consumption recovery, said CII.

In addition to high borrowing costs, the prevailing heightened uncertainty has prevented firms from furthering their investment plans.

The survey results, however, present an encouraging prognosis, with 90% of respondents feeling that their company's investment cycle will recover during the next fiscal.

Around 52% expect recovery during the first half of the next fiscal while about 37% of them foresee a pickup in investments by the second half of the year. Nearly half of the survey respondents felt that the capacity utilisation levels in their companies would range between 75% and 100% during the October-December quarter.

It is encouraging to note that given its bearing on the overall economy, a recovery in the rural demand is eagerly awaited and about 60% of the respondents feel that a pick-up in rural consumption will take place in the next fiscal, said CII.

With a resumption of business activity, expectations for the October-December quarter have improved, as the majority of the respondents anticipate an increase in sales (60%) and a count of new orders (55%).

Consequently, the profit outlook for the quarter has strengthened as nearly half of the respondents (47%) foresee an increase in profit margins, despite the majority of them indicating high input costs. Nonetheless, input price pressures, though still elevated, have moderated from the previous fiscal, with 51% of the respondents expecting raw material costs to remain elevated during the Oct-Dec quarter as compared to 59% in the previous quarter, CII said.