Bhubaneswar: Companies in India are optimistic about the return of good times in the Q2 of the FY2019. The indication of rising confidence about the future growth trajectory and business prospects has reflected in the CII Business Confidence Index (BCI) which has touched the series high of 64.9 as against 60.1 in the Q1. The significant uptick in the index, for the fourth consecutive quarter, is an indicator that business sentiment is upbeat.
The director general of CII, Candrajit Banerjee, while commenting on the stellar rise in Business Confidence, said, “There is a definite improvement in the tempo of business activity, powered by expectations of improved consumption and investment growth. A steep rise in business confidence reflects positive vibes within industry about the business environment. It underscores the hope that the facilitative government policies would result in faster rise in output and new orders which would spawn a host of business opportunities for firms and business units both in India and abroad.”
These findings are a part of CII’s 104th edition of quarterly Business Outlook Survey, which was based on nearly 200 responses from large, medium, small and micro firms, covering all regions of the country.
The improvement in the index this quarter has been led by a rise in both the Current Situation Index and the Expectation Index and is a testimony to a sharp improvement in sentiment in the respondents about the overall economic activity as well as the activity in their own company.
Amidst indications that our economy is on the cusp of a turnaround, nearly two-thirds of respondents (64 percent) opine that GDP growth will lie in the range of 6.5-7.5% in 2018-19. Among them, a large proportion (36 percent) expect GDP growth to lie in the range of 7.0-7.5% while about 28 percent foresee GDP growth in the 6.5-7.0% range.
On the inflation metric, a majority of respondents (60 per cent) anticipate the price rise to be within the range of 4.0-5.0% in 2018-19. It is interesting to note that the recent uptick in inflationary pressures has revised inflation expectations upwards since in the previous survey nearly 40 percent of the respondents anticipated inflation in the 4.0-5.0% range in 2018-19. Not surprisingly, a large share of respondents (42 per cent) anticipate a further increase in policy rates in 2018-19.
Also, business conditions are expected to improve as 64% of the firms anticipate an increase in sales in July-September 2018 after half of them experienced the same in the previous quarter. On similar lines, 61 per cent of the respondents anticipate an increase in new orders in the July-September 2018 which is higher than 55 per cent 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 (58%) expect to maintain status quo on their export orders in July-September 2018. Further, despite a rise in input costs, such as raw materials, fuel and wage expenditure anticipated to be incurred by firms, there are general expectations of elevated profits after tax during July-September 2018.
Around two-thirds of the firms (65 percent) anticipate an improvement in private sector investment activity in the remaining quarters of FY19. Of these, 26 per cent feel that an improvement in investment activity is already visible while the remaining 16 percent and 23 percent of the respondents anticipate a pick-up in the remaining two quarters of 2018-19.
There is widespread anticipation about a rise in capacity utilization within industry. Around 42 witnessed an increase in their capacity utilization levels over the last three months. Out of which around 30 percent witnessed a 0-10% increase in capacity utilization while 12 percent respondents witnessed an increase of more than 10%. This was closely followed by a similar proportion of respondents (41 percent) who experienced no change in capacity utilization levels. More than three out of four respondents feel that business environment has improved post the implementation of GST- particularly in terms of ease in paying taxes and transparency in the tax system.