India positive about healthy growth prospects

India Inc is upbeat about the robust growth prospects in the current quarter, with an index measuring business optimism levels rising sharply for the period, though concerns remain over high inflation, says a report.

"India Inc's optimism continues to surge with the index scaling to a three-year high," research firm Dun and Bradstreet said while releasing its Composite Business Optimism Index for the first quarter of calender year 2011.

"Strengthening profit expectations of the Indian corporate sector since the last three quarters underscores the robustness of the confidence apparent in the domestic economy currently," the report added.

It further said that RBI's monetary policy stance in the next policy review and the government's proposals for the corporate sector in the forthcoming Union Budget will play a key role in shaping business sentiment in the near future.

Inflation is another crucial factor that will determine the business sentiment in the quarter.

"Given that mounting inflationary pressures continue to be a significant downside risk to growth, how inflation pans out in the ensuing months would play an important role in shaping business sentiment in the near future," Dun & Bradstreet (India) President & CEO Kaushal Sampat said.

"Going forward, the RBI's monetary policy stance in the next policy review and the government's proposals for the corporate sector in the forthcoming Union Budget will play a key role in determining business expectations," he added.

The Business Optimism Index (BOI), which measures the pulse of the business community, increased by 4.8 per cent on a quarter-on-quarter basis to touch a three year high of 171.2 points in the January to March period of 2011 from 163.5 in the previous quarter.

As compared to first quarter of 2010, the BOI witnessed a substantial increase of 24.5 per cent.

For calculating the composite BOI, six parameters, namely net sales, net profits, selling prices, new orders, inventories and employee levels, are assigned a weight.

Their weights are then applied to these ratios and the results aggregated to arrive at the index.

The index is arrived at on the basis of a quarterly survey of various business expectation parameters.

It was observed only 1 out of 6 optimism indices inventory levels - has decreased compared to the previous quarter, the release said.

According to the report, the employment scenario is expected to improve in the first quarter of this calender year, with as many as 54 per cent of the respondents expecting an increase in the size of their workforce.

In comparison, 45 per cent of the respondents intend to keep the number of employees unchanged. One per cent of the respondents anticipate the size of their workforce to reduce.