CII’s Business Outlook Survey
According to the CII Northern Region Business Outlook Survey, though the overall outlook for business is better for the current six months (April-September 2009) vis-à-vis actual performance for the last six months (October-March 2008-09), the economic turnaround and recovery is expected to happen only in the second half of 2009-10 and beyond.
The Survey is based on 132 responses received from industry across the UT of Chandigarh and the states of Delhi, Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Uttar Pradesh and Uttarakhand. 64% of the respondents were from the manufacturing sector and 36% from the services sector. 46% of the respondents were from small organisations, 28% from medium and 26% from large organisations. 17% of the respondents were from public sector organisations and balance 83% from private sector.
72% of the respondents expect the GDP growth to be in the range of 5-7%. As against 48.5% of the respondents expecting a GDP growth of less than 7% in the April-November 2008-09 survey, 86% of the respondents this time expect a GDP growth of less than 7%. This indicates a growing convergence towards the view that the Indian economy would witness some moderation in growth rates in the wake of the global slowdown.
On inflation 87% of the respondents expect inflation to be above 2% in 2009-10, thereby ruling out possibility of sustained deflation. Given the ongoing global slowdown 96% of the respondents expect a turnaround only in the second half of 2009-10 or beyond.
The survey also looked into the expectations on various elements that build up business confidence viz. investments, capacity utilisation, sales, availability and cost of credit etc. The results are encouraging with positive expectations across the spectrum. 33% of the respondents expect an increase in investments during the current six months. Capacity utilisation is expected to improve with 55% of the respondents expecting a capacity utilisation of greater than 75% as against 40% of the respondents reporting a capacity utilisation of more than 75% in the last six months. 62% of the respondents expect an increase in sales as against only 39% of the respondents reporting an increase in the last 6 months.
56% of the respondents expect production to increase as against only 32% reporting an increase in the last six months. The expected increase in production is supported by expected increase in new orders. 59% of the respondents expect an increase in orders as against only 36% reporting an increase in orders during the last six months.
Outlook on India’s exports, which according to experts are crucial for the country’s economic recovery, seems to be much better for the current six months. 42% of the respondents expected an increase in volume of exports as compared to 29% actually reporting an increase in the last six months.
The credit availability is also expected to improve. 26% of the respondents expect the credit availability to increase as against only 9% of the respondents reporting an increase in the last six months. However a large proportion, 60%, of the respondents expect no change in the situation. Inspite of the aggressive rate cuts by RBI, only 29% of the respondents reported a decline in the cost of credit. This indicates that the changes in the policy rates are still not getting fully reflected in the bank rates and there is scope to reduce interest rates further.
The survey also asked the respondents about their main concerns. The average score of responses revealed that Slackening Consumer Demand followed by Global Economic Instability are the two most important concern areas. These are followed by currency risks and high interest rates.
The clear priorities that these scores throw up for Government action are importance of fiscal measures to stimulate demand bring down interest rates and ensure a stable rupee.
Source: CII