CII survey anticipates economic recovery

Prospects for economy are expected to improve with 61% of the respondents expecting 6% or above growth

Business outlook on economic conditions for the current quarter (April-June 2013) showed signs of modest recovery from the last quarter (January-March 2013), according to the 83rd Business Outlook Survey (BOS) by the Confederation of Indian Industry (CII) Northern Region, released here today.

"The CII Northern Region Business Outlook Survey conducted from 8 May to 2 June is based on responses from 65 organisations across northern states of Delhi, Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Uttar Pradesh and Uttarakhand and Union Territory of Chandigarh. A sector-wise break-up shows 55 per cent of the respondents were from manufacturing, 40 per cent from services and five per cent from the primary sector", said Pikender Pal Singh, regional director, CII NR.

"On the exchange rate front, only 18 per cent of the respondents expect the value of Rupee to lie above 55 per US dollar by end-March 2014. In contrast, most of the respondents expect exchange rate to stabilise and trade with an appreciation bias by end-March 2014. Presently, the exchange rate is hovering in a range of 57-59 per US dollar", added Singh. In the survey, domestic economic/political instability, high levels of corruption and slackening consumer demand emerged as the top three concerns of most firms. These three issues have significantly changed their positions as the top concerns of the respondents since the previous survey.

In the current year, the prospects for the economy are expected to improve with 61 per cent of the respondents expecting 6 % or above growth compared to 42 % of the respondents expecting so in the previous survey.

During the last quarter (January-March 2013), 29 % and 25 % of the respondents felt that business conditions were not good for the economy and their sector respectively. However, about 1/3rd of the respondents believed that business conditions were good for their companies.

In comparison, during the current quarter (April-June 2013), the expectations are better for the economy, sector and respective companies with greater percentage of the respondents rating the current quarter on a higher scale as compared to the last quarter. The expectations on various elements that build up business confidence like capacity utilization, sales and new orders are positive.

In terms of investment also, expectations for the current quarter are better than the previous survey. On domestic investments, encouragingly majority of respondents (53 per cent) expect their investments to increase, while 40 per cent of the respondents expect a decline or no change in their investment plans in the April-June 2013 quarter as compared to the previous one.

On the inflation front, expectations of high inflation continue to be high with most of the respondents (38 per cent) expecting it to lie above 7.0 per cent in the current year. 30 per cent of respondents expect inflation to be below 6.0 per cent compared to 10 per cent expecting the same in the previous survey. 40 per cent respondents expect gold prices to decline moderately, while 34 per cent of them expect crude oil prices to increase moderately in the current fiscal.

On the policy rate front, most of the respondent firms expect both repo rate and Cash Reserve Ratio (CRR) to be cut by 50 basis points during the current fiscal in order to support falling growth. While, 40 per cent and 34 per cent of respondent firms expect repo rate and CRR to be cut by 100 bps or more, respectively, during the next few months.

Coming to trade, 36 per cent of respondents expect an increase in volume of exports in the present quarter compared to 18 per cent in the previous quarter reflecting healthier expectations.

On deficit front, 46 per cent of the respondents expect fiscal deficit to be more than 5 per cent of GDP while 30 per cent expect the current account deficit, to be more than 5 per cent of GDP in the current year.