The Confederation of Indian Industry's 58th Business Outlook Survey, conducted bi-annually, has revealed that the business confidence that had strengthened during the beginning of the year has not weakened despite the weak monsoons and the prevailing uncertainty in the global economy.
Industrial growth would continue to trend upwards in the second half of the current fiscal according to a majority of the respondents of the Business Outlook Survey. Fifty one per cent of the respondents stated that general business prospects for their company would improve over the next six months.
While 41 per cent of the respondents felt that the same trends would continue, only 8 per cent felt that they would experience a worsening in the general business prospects for their company.
Sectoral analysis revealed that the capital goods and intermediate goods sectors would exhibit higher growth in the next six months.
The survey revealed that the majority of the respondents (54 per cent) are looking at fresh capital investments in the existing business unit.
The fresh investments would be largely fed by the expectations of a pick up in both domestic and international demand.
However, most of the investments are expected to be capital intensive as the majority of the respondents (57 per cent) have also revealed that the level of employment is expected to remain constant over the next six months.
Once again highlighting the critical role that reforms would have in propelling the growth rates in the economy, the respondents have expressed that poor domestic economic conditions and policies would be a significant deterrent to achieving higher levels of output.
The survey has also revealed that on the infrastructure front, power remains a problem area. In spite of adequate liquidity, the high interest rates and reluctance to lend by banks continue to hamper easy access to finance.
The survey has revealed that over the past six months the lack of orders and prevailing global and domestic economic and political scenario have been the primary factors limiting the level of output.
On an index of 1-6, where 1 is the most limiting and 6 is the least limiting factor the average rating received by lack of orders' and domestic economic and political scenario' are 2.8 and 2.7, respectively, indicating them to be the most limiting factors.
On the infrastructure front power continues to be the most vexing problem for industry in terms of infrastructure bottlenecks. On an index of 1-6 power has received a low average rating of 1.8.
The high rate of interest is the most significant factor impeding the easy access to finance according to the survey.
On a 6-point index it has received an average rating of 3. Reluctance exhibited by the banks to lend, limited access to global capital markets, procedural hassles and subdued equity and money markets are the other factors impeding the easy access to finance according to the respondents.
On the overall GDP growth of the economy 50 per cent of the respondents pegged the overall growth of the economy for the year 2002-03 at between 4.5-5 per cent. 46 per cent felt that the growth would remain between 5-6 per cent and a mere 4 per cent felt that the growth would cross 6 per cent in the current year.
The impact that the weak monsoons would have on the overall growth of the agricultural sector is expected to be offset by stronger growth in industry and exports.
The Business Outlook survey covered all industry sectors, including small, medium and large enterprises from the different regions.
The survey covered responses from 153 member companies across a spectrum of industry groups both in public and private sectors.
The survey relates to the actual performance of industry during April-September'02 and the forecast for October '02 March '03.
A use-based classification shows that 32 per cent of the respondents are manufacturers of intermediate goods, 22 per cent capital goods, 17 per cent are service sector companies, 16 per cent consumer goods and 13 per cent are basic goods companies.
Thirty two per cent of the respondents are from northern region, 29 per cent from western, 26 per cent from southern and 13 per cent from eastern region, according to the extent of industrial activity in the respective regions.