NCAER Business Confidence Index dips on growing pessimism

August 3: Business confidence dropped 3.8 points in July this year in line with subdued industrial production, as pessimism about investme...

August 3: Business confidence dropped 3.8 points in July this year in line with subdued industrial production, as pessimism about investment climate clouded the optimism on overall economic conditions, says a recent survey by the National Council for Applied Economics and Research NCAER.

The NCAER business confidence index for July dipped 3.8 points to 118.2 points from 122 points in April. Overall, the industry is staring at a pessimistic mood relating to financial position and capacity utilisation, the business expectations survey of NCAER revealed, adding, 8220;Larger firms are optimistic but small and medium sized firms are more pessimistic.8221;

The study further pointed out that intermediate, capital goods and services sectors have reported increase in costs and difficulty in getting funds, although in the aggregate, credit conditions are easy.

The recent drought and stock market fluctuations have also affected sales and plans for investment for a small proportion of firms in the capital goods and intermediate sector. 8220;Fall in inventories coupled with shorter order books have resulted in a cautious outlook,8221; the survey added.

It further predicted that costs are expected to increase over the next six months, especially in capital and intermediate goods sector, and growth would again be based on consumer goods industry.

The survey stated that in terms of the four components that constitute the aggregate confidence index, overall economic conditions in the next six months shows improvement, while the other three constituents register a decline.

The negative perceptions on the investment climate in the economy are marked in the western region and also visible in the southern and northern regions. 8220;The only exception is the eastern region where respondents who believe that investment climate has improved in the last six months increased from 41.2 per cent to 45 per cent of total sample.8221; However, the number of respondents from east have declined to 60 from 102 in the previous round.

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The feel good factor is low in the western region, while in the southern and northern region, the pessimism about the investment climate is compensated by optimism about overall economic conditions.