Business trend improving, says CII

NEW DELHI, JUNE 6: Business sentiments are on the uptrend with a majority of corporates expecting a marked improvement in business enviro...

NEW DELHI, JUNE 6: Business sentiments are on the uptrend with a majority of corporates expecting a marked improvement in business environment in the first half of the current fiscal, according to a business outlook survey.

The survey, conducted by Confederation of Indian Industry CII revealed that industry expected a better performance in production, increase in the total order position, capacity utilisation and retail sales during April-September 1999.

About 39 per cent of the respondents were more optimistic about the general business environment compared to their expectations six months ago, when confidence had dipped to a two-year low, the survey revealed.

Although investment intentions show an improvement compared to the last survey, in terms of quantum of investment, intentions of the respondents remain modest with a majority expecting a moderate increase of five-ten per cent.

However, majority of the 400 respondents rated political instability as a major hurdle in the next six months even asit continued to be the main reason for restraining growth in the second half of the previous fiscal.

The 51st business outlook survey covers small, medium and large enterprises both in the public as well as private sector and indicates the actual performance of Indian industry during October-March 1998-99 and the forecast for April-September 1999.

Increasing integration of the Indian economy with the global economy is evident in the rising incidence of external variables being cited as a restriction to output, according to the CII Business Outlook Survey. Global economic slowdown and a lack of orders from overseas customers have been cited as factors affecting performance although 48 per cent of the respondents expect an increase in exports in the next six months.

Story continues below this ad

Internal variables that have contributed to restricting output include high cost of funds and reduced demand from government and domestic customers. In addition, bank paperwork and bureaucracy and collateral requirement of banks were ratedhigh by respondents as factors constraining industry. However, infrastructure bottlenecks continued to be the main limitation of the Indian economy as 71 per cent of the respondents rated power followed by roads and ports as the basic sectors which needed massive improvement.

The silver lining was provided by the return of stability on the price front and the continued fall in weekly rate of inflation, as shown by wholesale price index WPI as there was near unanimity among respondents that the rate of inflation would remain within single digit levels, the survey said. The improved outlook for business is also expected to translate into an increase in employment with 39 per cent of respondents forecasting up to five per cent increase in employment, the survey added.