New Delhi: India’s business confidence for the first half of the fiscal improved on hopes the economy would revive later in the year, but global economic instability and slowing consumer demand still weigh, a survey showed.
The survey, released on Thursday by the Confederation of Indian Industry (CII), comes amid talk of a recovery in Asia’s third-largest economy following encouraging car sales and signs of reviving manufacturing activity in April.
The CII Business Confidence Index for April-September 2009-10 rose 2.4 points to 58.7 from October-March 2008-09.
“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 Chandrajit Banerjee, CII’s director general.
The government estimates economic growth slowed to a six-year low of 6.5% in 2008-09, hit by a global financial downturn and a contraction in domestic demand, after growing 9% or more in the previous three fiscal years.
The CII survey showed the slowdown in the economy will persist in 2009-10, with a majority of respondents expecting it to grow by 5-6% during the year. India’s central bank expects the growth rate to slow down to 6% in 2009-10.
The government has announced three stimulus packages and the country’s central bank has cut its key lending rate by 425 basis points since October to boost domestic demand.
However, a sharp fall in industrial output for March showed demand still remained sluggish. Industrial output, which accounts for a quarter of India’s gross domestic product, fell 2.3% in March, the steepest fall in at least 14 years.
Though the survey showed a majority of respondents were optimistic about an uptick in domestic sales in the first half of 2009-10, the outlook for the country’s exports continued to be negative.
India’s exports, which have been falling since October 2008, are expected to have fallen 33% in April from a year earlier as recession in developed economies crimped demand for goods abroad.
The decline is expected to last until September, the country’s trade secretary said last month.