Economy to improve though no change in last 6 months: Assocham

Majority of Indian businesses are optimistic about the state of the economy improving in the next two quarters, although the last six months have not witnessed much of a change at the ground level, said an Assocham survey on Sunday.

"In the coming six months, there seems to be growing optimism in terms of the economic performance with 80 percent respondents feeling that the state of the Indian economy would be better," said Associated Chambers of Commerce and Industry's (Assocham) latest Biz Confidence survey.

It also noted that while there were signs of economic recovery underway, the situation is still far from robust.

"The underlying economic activity, remains weak on account of the sustained decline in exports, rainfall deficiency and weaker than expected momentum in industrial production and investment activity," the survey said.

"However, riding on hopes of some decisive actions expected after the Bihar elections, the industry respondents remain optimistic about improvement in the sentiment, though at the present moment, broad demand and investment activity remains subdued," said Assocham secretary general D.S.Rawat in a statement.

With reference to the period in the second quarter (June-September) of the current fiscal, the majority of industry surveyed (60 percent) felt that the present economic situation is more or less same vis-a-vis the situation six months back.

The enterprises felt that though sales volume would pick up going forward, a commensurate change may not be visible on the profitability, thus limiting the producer's power to improve margins on increasing sales.

However, as many as 68 percent of the respondents expect that during the third quarter (October-December), sales volume will increase further.

On the cost of credit, majority of the respondents (44 percent) felt there was no change during the second quarter, although the Reserve Bank of India reduced policy rates in this period.

"The possible explanation to this could be that the benefit of the rate cuts is not being passed onto the industry appropriately. However, the industry feels that there could be a decline in the cost of credit going forward," the survey said.