Economy May be Bottoming Out, Business Today's Business Confidence Survey Shows

Jan 23, 2013, 02:45 ET from India Today Group

NEW DELHI, January 23, 2013 /PRNewswire/ --

* Eighth round of survey shows optimism for the second consecutive quarter driven by global and domestic factors.

* Nearly half the 500 Indian CEOs/CFOs surveyed report better economic conditions in the Oct-Dec quarter than the previous quarter.

* Cautious optimism spills over into 2013; 73% respondents believe the overall economic situation will improve or stay the same in the Jan-Mar quarter.

The burst of reforms since September 2012 seems to have had a positive effect in the Indian business community. Some 73 per cent in the latest Business Today-C fore Business Confidence Survey say the economy will be in a better shape or stay unchanged in the January-March quarter --- the downslide in the economy may be turning, in other words.

The survey found that 42 per cent of the businesses are upbeat about the impact of the recent steps taken by the government on their company's performance. Since September last year, the government has unveiled a number of reform measures: allowing foreign equity into organised retail, setting up of the Cabinet Committee on Investments, amendments to the land acquisition bill, and clearing the Banking Laws (Amendment) Bill, 2011, to name a few.

Confidence levels among businesses have risen for the second quarter after touching a record low in mid-2012. More than half the respondents in the survey --- conducted by market research agency C fore by polling 500 CEOs and CFOs --- reported higher demand in the October-December quarter and nearly 46 per cent reported better profit margins.  On a scale of 100, confidence levels are up to 53.8 from 52.4 in the April-June quarter.

                Oct-Dec July-Sept April-June Jan-March Oct-Dec Jul-Sep Apr-Jun Jan-Mar
                2012    2012      2012       2012      2011    2011    2011    2011
    index        53.8   52.4         49.3         55.4  52.3    56.8    64.4    74.8
    index for
    Engineering  50.2   49.5         48.3         52.7  50.4    55.1    62.3    73.4
    index for
    industry     52.3   51.9         48.7         53.2  51.8    56.3    64.1    74.5
    index for
    Services     56.8   55.5         52.4         59.5  55.2    58.6    65.7    75.7

To be sure, the latest score is lower than the 74.8 score recorded in the January-March 2011 quarter, when Business Today began its business confidence survey. The survey has quickly become a bellwether of business and economic sentiment.

Thirty one per cent of the respondents said they believed their profits will pick up in the January-March quarter, and 32 per cent expect investments in business operations to get better. Nearly two-thirds of the survey respondents said they saw no impact of the Reserve Bank of India's hawkish monetary stance of high interest rates on their companies performance. The central bank has taken some measures to ease lending rates but its rates are still high.

"The Euro zone has managed to resolve some of its issues. The economy in the U.S. looks like it is coming back up, China is also looking better. U.S. has eased concerns of policy uncertainty. In India specifically, we have seen that the government has demonstrated they are in-charge, it has been more of a signalling effect than the policy itself…all that has led to a feeling that things are not as bad," said Naina Lal Kidwai, Country Head of HSBC India and President of industry lobby Federation of Indian Chambers of Commerce and Industry.

Aroon Purie, Editor-in-Chief, India Today Group, of which Business Today is a part of, said the survey response showed how quickly business confidence can be brought back in the economy. "Recent actions by the government show it is not difficult to get confidence going. The UPA regime has a lot of ground left to be covered on the reforms front, and the coming Budget will be a litmus test of its intentions ahead of the 2014 general elections."

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

Marketing Contact:
Intekhab Aslam
Brand Manager, Business Today

SOURCE India Today Group