Optimism up in CII, Ficci surveys

Majority in Indian Inc expect both individual and economy prospects to improve in next 6 months

India Inc’s confidence in the economy has risen after the Narendra Modi government took over, show surveys by both the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (Ficci).

Both surveys covered about 150 companies. The CII one also showed companies were more  optimistic about their own performance. The Ficci one showed only marginal improvement. The CII survey is for the second quarter  of the current financial  year. That from Ficci was for the second quarter.

The survey  conducted by CII showed its Business Confidence Index (BCI) rose to a three-year high of 57.4 points in the  quarter  under review against 53.7 in the previous one. The BCI had been at an all-time  low of 45.7 in the second quarter of 2013-14. Before this, the BCI was higher at 62.5 points only in the first quarter of 2011-12.

A BCI over 50 points shows positive confidence, while one below that means it is weak.

Ficci’s survey revealed its BCI rose to a 15-quarter high of 72.7 points in the first quarter of 2014-15 against 69 in the previous one.  The confidence was low at 49 points in the first quarter of 2013-14.

The second quarter  of FY15, covered by CII, entirely represents  the Modi government in office. The first quarter, reviewed by Ficci, partly represents the period of the new regime. The Bharatiya Janata Party-led government took the oath of office  on May 26.

As such, CII director-general Chandrajit Banerjee attributed the index surge to the new government. “The  determination shown at the Centre to provide an impetus to  growth, along with reviving the ‘feel good factor’, has sent the index soaring for the second quarter in a row,” he said.

It must  be ensured that this momentum is maintained, he said.

The Ficci survey  did not give any overt credit to the  Modi  government but specifically asked the respondents about the ‘Make in India’ vision of the new prime minister. The  respondents  said the sectors in question—  engineering, iron and steel, electrical and electronic products, pharmaceuticals, medical equipment, automobiles and auto components, food processing  and agro-based industries, textiles and defence equipment— should  be made to ramp up manufacturing  capacities.

Respondents were also asked by Ficci about the cabinet’s recent  approval to the proposal to amend  three labour laws — Apprenticeship Act, Factories Act and Labour Act. A majority  of the  companies said the laws needed to be made industry-friendly and transparent. They said due importance should be given  to the welfare of employees and employers.

The highest percentage (41 per cent) of the respondents in the CII survey expected the gross domestic product  to grow by 5-5.5 per cent. About 30 per cent pegged it at 5.5-6 per cent. This  is  in line with the Reserve Bank’s  projections of five to six per cent, with the central estimate coming at 5.5 per cent. The economy rose 5.7 per cent  in the first quarter of the current financial year, after below-five per cent expansion in 2012-13 and 2013-14.

As many as 93 per cent  of those covered in the  Ficci  survey said they expected the overall economic situation to be better over the next six months.  

The expectation of higher economic growth  in the current  financial year is  rooted in optimism  about the overall demand situation in the CII  survey. A significant 77 per cent of respondents expected their sales to increase in the July-September quarter, much higher than 50 per cent in the previous quarter. Similarly,  49 per cent of the respondents expected their export orders to increase in the  second quarter, compared to 39 per cent in the previous one.

However, in the Ficci survey, the  improvement  in these parameters was felt to be marginal. As many as 64 per cent of the respondents felt  that sales would  be higher in the next six months, compared to 62 per cent in the previous one. And, 45 per cent of the companies in the first quarter felt their exports would be higher in the next six months, against 41 per cent in the previous quarter.