Business Confidence Improves After Burst of Reforms, Business Today's Business Confidence Survey Shows

Oct 15, 2012, 07:07 ET from India Today Group

NEW DELHI, October 15, 2012 /PRNewswire/ --

* Seventh round of survey shows optimism tempered with caution over the implementation of economic changes

* 47% of 500 Indian CEOs/CFOs surveyed foresee better prospects for their companies in the next quarter (October-December)

* Half the survey respondents believe availability of finance will ease in the October-December quarter

Respondents to Business Today's Business Confidence Survey for the July-September quarter say the new wave of reforms are encouraging. But they are not certain the government can see them through, and most do not expect their businesses to be affected by the reforms in the October-December quarter.

The survey finds that confidence levels among businesses have risen after several months of despondency. If it were not for the opening up of multi-brand retail FDI, the increase in diesel prices. and a cap on subsidised cooking gas, business confidence levels would have been worse for the quarter ended September than for the previous quarter. The survey found that businesses were slightly more upbeat about the next three months. On a scale of 100, confidence levels are up to 52.4, from 49.3 in the April-June quarter.

                July-Sept April-June Jan-March Oct-Dec Jul-Sep Apr-Jun Jan-Mar
                2012      2012       2012      2011    2011    2011    2011
    index       52.4         49.3         55.4  52.3    56.8    64.4    74.8
    index for
    Engineering 49.5         48.3         52.7  50.4    55.1    62.3    73.4
    index for
    industry    51.9         48.7         53.2  51.8    56.3    64.1    74.5
    index for
    Services    55.5         52.4         59.5  55.2    58.6    65.7    75.7

Business Today launched the survey in the January-March 2011 quarter. The survey has quickly become a bellwether of business and economic sentiment. The first round had showed that companies were enjoying pricing power, which the Reserve Bank of India (RBI) had later said it would like to reduce through its policies as it was fuelling inflation. Though the central bank has taken some measures to ease monetary policy, its hawkish monetary stance continues with high borrowing rates kept high in an attempt to tame inflation.

A senior engineering services executive said the low investment growth in the economy was unlikely to change until interest costs were brought down. "At the current interest rates, borrowing is not viable for large-scale projects," M.S. Unnikrishnan, Managing Director, Thermax told Business Today. "When the internal rate of return of infrastructure projects is in the teens and interest rates are at 13 per cent, it's not viable to make investments."

Still, half the survey respondents said they believed availability of finance will ease up in the October-December quarter. The order book situation, respondents said, remains weak with just 38 per cent saying they expected growth in the October-December quarter and only about a quarter expecting better selling prices.

Aroon Purie, Editor-in-Chief, India Today Group, of which Business Today is a part, said the recent reform measures announced by the government did not come a day too late but would take time to translate into growth numbers in the economy. "Confidence in the business community is clearly turning around as the Business Today Business Confidence Survey shows," Purie said. "What needs to be done next are specific government decisions aimed at getting projects with big ticket investments off the ground. That's a simple fix and does not need parliamentary approval or anything remotely as big."

Editorial Contact:
K. Sai Srinivas
Deputy Editor, Business Today

Marketing Contact:
Intekhab Aslam
Brand Manager, Business Today

SOURCE India Today Group