Biz confidence at India Inc rises to 10-year high
- Ficci’s Business Confidence Index witnessed further improvement at 74.2
- Centre’s capex push in the budget is likely to lead to faster revival in growth, said respondents
NEW DELHI : Domestic firms are optimistic about greater pricing power that would drive their profits over the next two quarters with better hiring prospects, though fears of a fresh wave of covid inflections, lack of affordable credit and rising input costs are some of their key concerns, a business confidence survey revealed.
Overall, the Business Confidence Index witnessed further improvement at 74.2 in the third quarter of the current financial year, the highest in a decade, the Federation of Indian Chambers of Commerce and Industry (Ficci) said in its latest round of survey involving 190 companies from various sectors. The survey captures the mood of the industry for the two quarters ending 30 June this year.
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“For the past few months, green shoots of recovery have been strengthening. The pick-up in economic activity has broadened and the same is being reflected in the various lead indicators. The demand conditions, which have been a major cause of concern for a majority of businesses, are also seen improving," it said.
Respondents have been unanimous that the Centre’s capital expenditure push in the Union budget 2021-22 would lead to faster revival in growth. Finance minister Nirmala Sitharaman on 1 February raised the capital expenditure budget by 34.5% to ₹5.54 trillion in 2021-22.
The survey has been conducted against the backdrop of the economy coming out of recession in the third quarter ended 31 December with 0.4% growth, after remaining in contraction mode for two consecutive quarters.
India Inc, however, remains cautious. The uncertainty surrounding a fresh surge in covid-19 cases remains the topmost concern for the economy and corporate India, the survey said. “A further acceleration in the pace of vaccination should help maintain stability in recovery," it added.
“Better sales prospects as well as greater pricing power of corporate India is likely to drive profits over the next two quarters," it said. The survey, conducted after financial results of the third quarter of 2020-21, found that 35% of the respondents expected to hire new employees over the next six months, a significant improvement compared to 22% having similar outlook in the previous quarter’s survey.
According to the survey, subdued demand is still a major concern for 56% of the participating companies. “Even though this is the lowest in about nine quarters, nonetheless the proportion of participating companies affected by it remains significant," it revealed.
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Credit flow is still a major issue for businesses, the survey showed. “In the present survey, proportion of respondents citing cost of credit as a worrisome factor remained unchanged from the previous round - around 32% participants cited credit costs as a concern," it said, adding that average interest cost of companies is about 9.7% on term loans and 9.3% on working capital loans.
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