Growth expectations for the current financial year have increased to over 8 per cent, reflecting a significant increase in business confidence compared with the scenario six months ago, the latest Confederation of Indian Industry outlook survey has said.
CII's business confidence index (CII-BCI) at 69.3 was higher for April-September 2006 with an increase of 2.1 points, compared to the previous period of September 2005-March 2006.
The CII-BCI -- constructed as a weighted average of the current situation index and the expectations index (EI) -- was significantly higher among non-manufacturing firms engaged in services compared with manufacturing firms.
The CSI, which compares current business conditions with the previous six months, has gained 1.6 points. This shows that a larger number of responding firms have appraised better current conditions for growth of the overall economy, the sector in which they operate and their individual company growth performance to be better, compared with the previous six months.
The EI that reflects the perceptions of the Indian industry with regards to performance of their company, sector and the Indian economy for the next six months is up by 2.3 points over the previous such survey. Non-manufacturing firms were more bullish about growth prospects compared with manufacturing firms on this scale as well.
The strong overall confidence is reflected in a similar trend for all the underlying components of the survey.
The survey said 88 per cent of the respondents plan to increase investments during April-September 2006. Capacity utilisation across the board has increased. About 75 per cent of the respondents have expressed confidence that capacity utilisation for April-September 2006 will be up to 100 per cent.
Yet another 25 per cent of the respondents expressed confidence that capacity utilisation will exceed 100 per cent.
The value of production is also expected to increase in the next six months. This was revealed by 81 per cent of the respondents. For 75 per cent of the respondents, production increased in the first half of 2005-06. Further increase in production is likely because of an expected increase in new orders.
The first half of 2006-07 is expected to be better in terms of an increase in new orders, as 83 per cent of the respondents expected new orders to increase in the next six months, while about 74 per cent of the respondents said new orders had increased in the second half of 2005-06.
Employment is also expected to increase in the second half of this financial year. This was expressed by 53 per cent of the respondents, who expected employment to increase during April-September 2006, while 50 per cent of them said employment had increased during the period September 2005-March 2006.
Regarding exports, 70 per cent of the respondents expressed confidence in exports expansion during April-September 2006. During October 2005-March 2006, about 55 per cent of the respondents said exports had increased.
However, 78 per cent of the respondents reported no reduction in procedural delays -- a long-standing hurdle for exporters that raises transactions costs.
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