India's business confidence worsened in Q3

The CII's quarterly Business Confidence Index dropped below the 50-point-mark during the third quarter of the current financial year, reflecting a continuing deterioration in the macro economic scenario.

The index dropped to 49.9 points for the October-December period as compared to 51.3 points recorded in the previous quarter and much below 55 points recorded in the first quarter of 2012-13.

"Majority of respondents rated domestic economic developments, high interest rates, infrastructure bottlenecks and institutional issues among the key concerns," CII said in the survey report.

The business confidence has worsened despite a series of economic reform measures taken by the government.

India Inc gave "thumbs up" to the economic reform measures but feel that it was not enough to lift the confidence.

"While reform measures undertaken by the government in the recent months will surely start yielding results, it is important that the momentum on reforms is not lost," said CII director general Chandrajit Banerjee.

Nearly 40 percent of the respondents felt that reform measures announced by the government would have a positive impact on investments, even though the impact on output may take some time to take effect.

Despite the reform measures, majority of firms expect the GDP growth in the current fiscal to remain subdued in the range of 5.5 to 6 percent.

The survey also indicates continuing elevated trend in inflation and fiscal deficit in the remaining period of the current fiscal. Majority of the respondents expect WPI-based inflation for the current fiscal to end up as high as 7-8 percent, much higher than RBI's comfort level.

As regards the fiscal deficit, 54.8 percent of respondents expected it to be in the range of 5.5-6 percent of GDP, way higher than the revised government target of 5.3 percent for 2012-13.