Optimism Rises in Ficci and CII Surveys

Oct 07, 2014 Tushita Economy 0

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There might be reports that the banks are not responding to the Modi effect just yet, but India Inc.’s confidence in the economy has surely risen after the Narendra Modi government took over.

This was shown by surveys by both the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (Ficci).

Both the surveys covered nearly 150 companies. The CII survey also depicted that companies were more optimistic about their own performance. The Ficci survey showed only marginal improvement. CII’s survey was for the second quarter of the current financial year, while Ficci’s was for the first and second quarter.

BCI Stats:

CII’s survey also indicated that its Business Confidence Index (BCI) rose to a three-year high of 57.4 points in the quarter under review against 53.7 in the previous one. The BCI had been at an all-time low of 45.7 in the second quarter of 2013-14. Before this, the BCI was higher at 62.5 points only in the first quarter of 2011-12.

A BCI over 50 points shows positive confidence, while one below that means it is weak.

As for the Ficci’s survey, it revealed its BCI rose to a 15-quarter high of 72.7 points in the first quarter of 2014-15 against 69 in the previous one.  The confidence was low at 49 points in the first quarter of 2013-14.

The Bharatiya Janata Party-led government took the oath of office on May 26.The second quarter of Financial Year15, covered by CII, entirely represents the Modi government in office. The first quarter, reviewed by Ficci, partly represents the period of the new regime.

As such, CII director-general Chandrajit Banerjee attributed the index surge to the new government. “The determination shown at the Centre to provide an impetus to growth, along with reviving the ‘feel good factor’, has sent the index soaring for the second quarter in a row,” he said.

He also said that it was now important to ensure that the momentum is maintained.

The Modi Factor and issue of production:

Though the Ficci survey did not give any overt credit to the Modi government, it still specifically asked the respondents about the ‘Make in India’ vision of the new Prime Minister.

The respondents commented on the root issue – production. They said the sectors in question— iron and steel, electrical and electronic products, engineering, pharmaceuticals, medical equipment, food processing  and agro-based industries, automobiles and auto components, textiles and defence equipment— should  be made to ramp up manufacturing  capacities.

Ficci asked the respondents about the cabinet’s recent approval to the proposal to amend three labour laws — Apprenticeship Act, Factories Act and Labour Act also. Most of the companies said that the laws needed to be made industry-friendly and transparent. They said due importance should be given to the welfare of employees and employers.

GDP analysis:

The economy rose 5.7 per cent in the first quarter of the current financial year, after below-five per cent expansion in 2012-13 and 2013-14.The highest percentage (41 per cent) of the respondents in the CII survey expected the gross domestic product to grow by 5-5.5 per cent. About 30 per cent pegged it at 5.5-6 per cent. This is in line with the Reserve Bank’s projections of five to six per cent, with the central estimate coming at 5.5 per cent.

As many as 93 per cent of those covered in the Ficci survey said they expected the overall economic situation to be better over the next six months.

The expectation of higher economic growth in the current financial year comes from the optimism about the overall demand situation in the CII survey. A significant 77 per cent of respondents expected their sales to increase in the July-September quarter, much higher than 50 per cent in the previous quarter. Similarly, 49 per cent of the respondents expected their export orders to increase in the second quarter, compared to 39 per cent in the previous one.

However, in the Ficci survey, the improvement in these parameters was felt to be marginal. As many as 64 per cent of the respondents felt that sales would be higher in the next six months, compared to 62 per cent in the previous one. And, 45 per cent of the companies in the first quarter felt their exports would be higher in the next six months, against 41 per cent in the previous quarter.

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• business account, CII, economy news, Ficci, Indian Economy, RBI

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