CII survey: India Inc sentiment still subdued

India Inc continues to be subdued about its prospects and that of the macro economy this financial year, according to a survey by the Confederation of Indian Industry (CII).

The CII-Business Confidence Index (CII-BCI) for the third quarter of 2011-12 has declined to 48.6 from 53.6 in the previous quarter. Around 37.2 per cent of respondents expected GDP growth to moderate to 7-7.5 per cent for the current year, not far from what the finance ministry expected.

India’s economy grew by 8.5 per cent in 2010-11. It moderated to 7.3 per cent in the first half of this year. For the entire year, the finance ministry’s mid-year analysis predicted 7.25-7.75 per cent growth. At present, officials say growth would be a little over seven per cent for 2011-12. A majority of the respondents also expected capacity expansion in their companies to stagnate. As many as 56.9 per cent said in the third quarter they continued with capacity similar to that in the second quarter. “Stagnation in investment plans has emerged as a key concern in the current macro-economic scenario,” said CII director-general Chandrajit Banerjee.

However, this current calendar year may not be as bad. “Hopefully, 2012 would improve sentiments and outlook as we start seeing some positive developments, including moderating inflation, a more accommodative monetary stance and, hopefully, a growth-oriented budget,” Banerjee said.

The survey reveals the high fiscal deficit is the top concern of most firms, followed by surges in import, inadequacy of skilled labour and stagnancy in reforms. Confidence among micro, small and medium enterprises in the services sector has remained higher than manufacturing, at 56.1 compared to 52.6.

The BCI has been falling in every quarter since the last one of 2010-11, and has fallen by a cumulative 18.1 points since then.