A meeting of vigilance officers from public and private sector companiesWith companies being optimistic that economic activities will gather pace this year, the Confederation of Indian Industry (CII) Business Confidence Index 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,” CII said on the surge in the index.
The significant rise in the index this quarter could be attributed to distinct improvement in the Expectations Index. There is also a marginal uptick in the Current Situation Index, indicating business sentiment is strong and firms are particularly upbeat about activity in their sectors in the future, the body observed.
However, asked to rank their concerns in the coming six months, a majority 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 (BCI) 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 had subdued in the past few quarters.
The findings are a part of CII’s 98th edition of quarterly Business Outlook Survey, based on around 200 responses from large, medium, small and micro firms, covering all regions.
Business conditions are expected to improve, as 63 per cent of the firms expect an increase in sales in January-March 2017, as compared to only 39 per cent who experienced the same in October-December 2016.
On similar lines, 60 per cent of the respondents anticipate an increase in new orders during Jan-Mar 2017 as compared to 41 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 (61.8 per cent) expect to maintain status quo on their export orders in Jan-Mar 2017.
In an indication that the turn of the investment cycle is now imminent, firms expect an improvement in capacity utilisation in the fourth quarter of FY 2016-17.
Around 65 per cent expect capacity utilisation levels to be above 75 per cent, while only 36 per cent of respondents experienced the same in the October-December quarter.
However, despite this, a majority expect no change in their domestic and international investment plans in January-March. More than half expect to maintain status quo on plans about investing in the domestic economy. 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.