Consumer confidence, industrial outlook witnessing signs of improvement-Survey conducted by RBI

Various surveys indicate that business confidence has started to rebuild, though it still stays weak. Business confidence has turned around as indicated by a sharp q-o-q growth in various business indices. The surveys indicate that better investment prospects, improving sales, new orders and improved export performance have contributed to rising optimism. However, weak demand, political uncertainty and high inflation appear to be among the factors restraining growing optimism.

The Reserve Bank's Industrial Outlook Survey conducted during November- December 2013, showed that in terms of assessment, the Business Expectation Index (BEI) improved marginally for Q3 of 2013-14, but still remained below the threshold level of 100 separating contraction from expansion. Based on expectations, the index showed an improvement in Q4 of 2013-14 over the previous quarter.

An analysis of responses showed marginal improvement in sentiments regarding production, order books, capacity utilisation, exports and imports for Q3 of 2013-14. The demand outlook for Q4 of 2013-14 shows improved optimism as well.

The Consumer Confidence Survey conducted in December 2013 shows improvement in consumer confidence as indicated by the Current Situation Index (CSI) and Future Expectations Index (FEI).

Growth projections revised downwards-Agencies' projections for 2013-14 Latest Projection Earlier Projection Agency GDP Growth (%) Month/Year GDP Growth (%) Month/YearFinance Ministry 5.0-5.5 Sept. 2013 6.1-6.7 Feb. 2013PMEAC 5.3 Sept. 2013 6.4 Apr. 2013IMF* 4.6 Jan. 2014 4.3 Oct. 2013World Bank 4.8 Jan. 2014 4.7 Oct. 2013OECD** 3.4 Nov. 2013 5.3 May. 2013ADB 4.7 Dec. 2013 4.7 Oct. 2013NCAER 4.8-5.3 Nov. 2013 5.9 Aug. 2013*: IMF's projection in factor cost corresponding to 4.4 per cent in market prices. **: GDP at market prices.

Growth in 2013-14 is likely to be somewhat weaker than the earlier projection as signs of pick up are yet to emerge. Improved confidence and actions to support infrastructure projects could translate into a slow-paced recovery in 2014-15 provided these actions are sustained. Inflation has exhibited marked moderation in December and may soften further in Q4 but upside risks remain for 2014-15. The persistence in high inflation continues to pose a challenge to growth over the medium-term, even as its fallout in terms of a wide CAD, on the back of lower savings, has been contained through policy responses over Q3 of 2013-14.

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