CII north business outlook tad up

The expectation for the ongoing quarter (July-September 2012) are better for the economy.

Business outlook for the northern region shows signs of modest recovery for the ongoing quarter (July-September 2012),as per the quarterly survey conducted by the Confederation of Indian Industry (CII) Northern Region.

The CII Northern Region Business Outlook Survey released here this afternoon– conducted from July 10,2012 to August 8,2012 — is based on responses from 61 organisations across eight northern states (Delhi,Haryana,Himachal Pradesh,Jammu and Kashmir,Punjab,Rajasthan,Uttar Pradesh and Uttarakhand) and Union Territory Chandigarh. Sector-wise breakup shows that 73% of the respondents were from manufacturing sector and 27% from service secrtor. Based on the size of the organizations,6% were micro,38% were small,20% medium and 36% were large organisations in the present survey.

As many as 87% of the respondents expect growth to be less than or about 7.0% during the current financial year 2012-13 as compared to only 31% respondents expecting so,during the previous survey,hence indicating a moderation in growth expectation for the current fiscal.

Expectations of high inflation continue with 37% of the respondents pegging inflation to be above the 9% mark in the current fiscal. 84% of the respondents expect it to be above 7.0%. Reserve Bank of India expects inflation to be at 7.0% by March 2013.

However,the outlook on business conditions for the ongoing quarter (JulySeptember 2012) shows signs of modest recovery. The expectation for the ongoing quarter (July-September 2012) are better for the economy,sector and company with greater percentage of the respondents rating the current quarter as better as compared to last quarter (AprilJune 2012). The expectations on various elements that build up business confidence viz – capacity utilization,sales,new orders and pre-tax profits are positive.

In terms of investment,expectations for the current quarter are better than previous survey. On domestic investments front,only 22% of the respondents expect a decline or no change,as against 57% in previous survey. The corresponding figures for international investments are 37% for this survey and 45% for previous survey. 62% expect an increase in domestic investment in the range of 0-20% as against 41% in the previous survey. While only 26% expect an increase in international investments in the range 0-20% as compared to 37% in the previous survey. Clearly the sentiment is more optimistic for domestic investments.

About 95% of the respondents believe that infrastructure bottlenecks and/or lack of policy reforms are holding back domestic investments. More than 50% respondents have rated issues such as availability of power,cost of power,cost of capital,taxation regime,transportation infrastructure,availability of skilled labour,good road connectivity and land acquisition as areas of major concern impacting their investment plans.

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With regard to input costs,expectations are that costs of raw material,wages and salaries and electricity and fuel will increase during current quarter but lower in comparison to the last quarter,while cost of credit is likely to remain unchanged according to majority of the respondents.

Coming to international trade,54% of the respondents expect no change while 34% expect an increase in volume of exports. As against this,41% of the respondents reported an increase in exports during the last quarter. This downslide in expectations may be due to persistent uncertainty in global markets.

The survey also asked respondents about their key concerns on 10 pre-defined concern areas. High interest rate and stagnancy in reforms are the top two major concerns of Indian corporates in the current survey. This is on account of sustained hike by RBI in the key policy rates to neutralize inflation and inflationary expectations in the economy during the previous year. High raw material cost is the third most important concern while slackening consumer demand and currency risks are the fourth and fifth most important concern respectively for the Indian corporates.