Business confidence improved in the first quarter of this fiscal on the back of strong fundamentals, driven by healthy domestic demand and moderating oil and commodity prices, according to the Confederation of Indian Industry-Business Confidence Index (CII-BCI) survey.
The survey revealed that business confidence improved to 66.1 in the first quarter (Apr-Jun FY24) from 64 in the previous quarter.
However, it remained lower than 66.9 in the same quarter last year.
The survey was conducted from May to June 2023, and covered around180 firms of varying sizes.
The reading reaffirmed the positive momentum seen in a host of recent high frequency indicators such as goods & services (GST) collection, air and rail passenger traffic among others in the first quarter.
The respondents noted that the robust capex momentum of the government, strong domestic drivers and robust financial system will be the top three drivers of growth in the current fiscal.
According to the survey, 63 per cent of the respondents expect GDP growth to remain between 6-7 per cent in FY 24, which is broadly in line with the 6.5 per cent forecast of the Reserve Bank of India (RBI) and other multilateral agencies.
The survey also notes that 62 per cent of respondents expect muted global growth and geopolitical turbulence as the key business concerns in the current fiscal year.
The survey also notes that 65 per cent respondents report that the fresh sightings in private investment will be sustained in the current fiscal as there are several factors which are driving private capex such as deleveraged corporate balance sheets, which has in turn increased the capacity of the corporates to invest once there is clear visibility on demand.
Chandrajit Banerjee, director general, CII said the positive momentum seen in the index is encouraging and reiterates the on-ground experience of most of the industry players as the improvement in demand has translated into an improvement in capacity utilization in many sectors which is going to lend further impetus to private capex this year.
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Upholding the importance of RBI to stick with a pause on the interest rate to preserve the growth impulses, as it will bring down the cost of capital for the India Inc, around 53 per cent respondents expect the RBI to maintain status-quo on the key interest rates in the first half of the current fiscal.
Apart from reinvigorating investments, the survey also notes that nearly half of the respondents (47 per cent) expect an increase in employment in the first quarter of the current fiscal as compared to the actual number of 43 per cent in the previous quarter.
The survey also notes that the majority of the respondents anticipate an increase in sales (55 per cent) and count of new orders (57 per cent).
Consequently, the profit outlook for the quarter has strengthened as over one-third of the respondents (38 per cent) foresee an increase in profits, despite the majority of them indicating high input costs.
“There are already signs of increase in capacity utilization of the respondent companies, with more than half (52 per cent) expecting it to stand in a range of 75-100 per cent in the Apr-June quarter, up from 45 per cent in the previous quarter,” the survey noted.
“The Indian economy stands as a beacon of growth amidst choppy global scenarios buttressed by softening inflation and government capex. While the lagged impact of RBI’s rate hikes will take some bite off growth, a well capitalized financial system and healthy corporate balance sheets will support growth,” Banerjee added.