New Delhi: With companies being optimistic that economic activities will gather pace this year, the Confederation of Indian Industry (CII) business confidence index (BCI) soared to an all-time high in the January-March quarter. “A sharp uptick in business outlook, at the onset of 2017, underpins the hope that the reform initiatives of the government would unravel a host of investment opportunities for firms, going forward," industry body CII said on the surge in the index.
The significant rise in the index this quarter could be attributed to the distinct improvement in the ‘expectations index’ even as there is a marginal uptick in the ‘current situation index’, indicating that business sentiment is strong and firms are particularly upbeat about activity in their sectors in the future, the industry body observed.
However, asked to rank their concerns in the coming six months, a majority of the firms stated low domestic demand followed by fragile global economic recovery and rise in commodity prices as their key concerns. “The turnaround in business expectations, as indicated in the survey, gives credence to the belief that a new growth narrative is being scripted for the country based on improved business sentiment and investor confidence," CII director general Chandrajit Banerjee said.
The CII business confidence index recorded an all-time high of 64.1 during the January-March period against 56.5 recorded in the previous quarter. There has been a sharp rise in the index after it remained subdued in the last few quarters.
The findings are a part of CII’s 98th edition of quarterly business outlook survey, which was based on around 200 responses from large, medium, small and micro firms, covering all regions of the country. Business conditions are expected to improve as over 63% of the firms expect an increase in sales during January-March 2017, as compared to only 39% who experienced the same in October-December 2016.
On similar lines, 60% of the respondents anticipate an increase in new orders during January-March 2017 as compared to 41% who witnessed the same in the preceding quarter. Much of the recovery in business conditions is expected to be domestically driven as a large proportion of firms (61.8%) expect to maintain status quo on their export orders in January-March 2017. In an indication that the turn of the investment cycle is now imminent, firms expect an improvement in capacity utilization in the fourth quarter of fiscal year 2016-17. This is borne out from the fact that around 65% of respondents expect capacity utilization levels to be above 75% while only 36% of respondents experienced the same in the October-December 2016 quarter.
However, despite the rise in capacity utilization, majority of the firms expect no change in their domestic and international investment plans in January-March 2017. More than half of the firms expect to maintain status quo on their plans about investing in the domestic economy during the quarter. Firms are keeping investment plans on hold despite the expectation of an improvement in sales and new orders in the January-March quarter owing to the existing excess capacity in the economy.