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Business News/ News / India/  ‘Business confidence improved in June qtr’

‘Business confidence improved in June qtr’

Business confidence in India has improved in Q2 2019, according to a survey by the Confederation of Indian Industry (CII). The CII's Business Confidence Index increased to 66.1 in Q2, up from 64 in the previous quarter. The survey also found that businesses are optimistic about prospects for fresh private investments, with the majority of respondents expecting the economy to grow at 6-7% this fiscal year. However, concerns were raised over slowing growth in developed economies and geopolitical risks impacting economic growth in the future.

‘Business confidence improved in June qtr’Premium
‘Business confidence improved in June qtr’

New Delhi: Business confidence has improved sequentially in April-June, reaffirming the positive trends in economic activity like goods and services tax (GST) collections, as well as air and rail passenger traffic, according to the Confederation of Indian Industry.

CII’s business outlook survey indicates an increasing number of businesses are optimistic about prospects of fresh private investments.

The survey done in the May-June period, involved over 180 businesses across sectors and regions with nearly two-thirds representing micro, small and medium enterprises, CII said.

CII’s Business Confidence Index stood at 66.1 in the June quarter, compared to 64 in the previous quarter, and 66.9 in the year earlier.

Most businesses covered in the survey expected the economy to grow at 6-7% this fiscal year, in line with the Reserve Bank of India (RBI)’s estimates of 6.5% economic growth.

Survey participants said the momentum of capital expenditure by central government, strong domestic drivers and a robust financial system are top three factors to aid growth.

The Centre is also counting on improved financial health of lenders and other companies to kick in a fresh cycle of private investments that could aid further economic growth and create more jobs.

That said, slowing growth in developed economies as well as deepening geopolitical risks may impact economic growth forecast for FY24.

CII director general Chandrajit Banerjee said that the positive outlook in business confidence in the June quarter is encouraging and reiterates the on-ground experience of most industry players. “Improvement in demand has translated into improvement in capacity utilisation in msany sectors, which will lend impetus to private capex."

“An overwhelming majority of respondents (65%) are of the view that the fresh sightings in private investment will be sustained in the current fiscal," he said citing deleveraged corporate balance sheets, which in turn increased the capacity of private businesses “to invest once there is a clear visibility on demand".

In view of the global economic slowdown, 60% of the respondents said there’s no change in their international investment plans. Nearly 46% of respondents said their India investment plans will not change but 39% anticipated an increase in investments.

The survey said businesses expect the pause on interest rate increases to continue “to preserve growth impulses". 62% of the respondents cited muted global growth and geopolitical turbulence to be key concerns for the current financial year.

The pause on interest rate increases is expected to bring down the cost of capital for businesses, fuelling fresh investments and giving private capex a further leg-up, the industry body said.

“There are already signs of increase in capacity utilisation of the respondent companies, with more than half (52%) expecting it to stand in a range of 75-100% in the Apr-June quarter, up from 45% in the previous quarter," it said. Also, more businesses in the June quarter are confident of job creation growth than earlier.

Majority of the businesses are anticipating an increase in sales and in new orders in the June quarter. The profit outlook for the quarter has strengthened as over one-third of the respondents (38%) foresee an increase in profits, despite majority of them indicating high input costs.

Input price pressures, though still elevated, have moderated from the previous quarter, with 35% of the respondents expecting raw material costs to remain elevated during the Apr-June quarter as compared to 46.3% in the previous quarter, the survey said. (ends)

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Gireesh Chandra Prasad
Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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Published: 09 Jul 2023, 11:38 PM IST
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