Economy to gain momentum in second half of FY17: Assocham

The economy is expected to fare better in the second half of the current financial year, backed by a likely rise in sales and improved capacity utilisation, though fresh investments and jobs creation might be a concern, according to a report from the Associated Chambers of Commerce and Industry (Assocham).

More spending on infrastructure, largely by the government, is seen as the most important driver for a turnaround in the economic outlook for the second half, the period between October and March, it added.

About 66 per cent of those polled in the Assocham Bizcon Survey expected improved sales and capacity utilisation during the second half but remained uncertain on fresh investment. A majority (55.6 per cent) believe employment conditions will not improve in the coming days. And, 38.9 per cent feel their profits might not change in the ongoing quarter.

The second best driver for an optimistic outlook is effective policy reform, followed by a stable exchange rate for the rupee, despite global uncertainty on account of the US Federal Reserve’s next policy move and the bitterly fought polls there.

While a big chunk of Bizcon Survey participants felt the present economic situation was better than the previous six months on several parameters, the optimism is more pronounced for the second half of 2016-17.

"There is a clear turnaround in business confidence, which holds the key to new investment and consumer confidence," said Assocham president Sunil Kanoria.

He said unlike the previous surveys, the latest round indicated a slight uptick even with regard to capacity utilisation and the order book. However, generation of employment and improvement in wages is some distance away.

The confidence was pronounced at the level of individual companies, as 89% of respondents expressed optimism about better days ahead. About 55.6% felt there was an increase in sales volume during the September quarter and expected more during the December one.

"The power to increase price on the part of producers and service providers would remain constrained till there is some more improvement in consumer demand," said Kanoria.

About 44.4% felt that in the July to September period, there was no change in wage costs. Half felt this wouldn't change in the near future.

The economy grew at the slowest pace in six quarters at 7.1% in April-June, mainly on subdued performance of the mining, construction and farm sectors.

The finance ministry expects the economy to grow by 7-7.75% in the current financial year, against 7.6% the previous year.