Amidst persistent global uncertainty, the Confederation of Indian Industry's Business Confidence Index (CII-BCI) rose to 67.1 in the second quarter (July-September) of FY24. As compared to a reading of 66.1 in the April-June quarter and 62.2 in July-September 2022, the rise has been attributed to resilient domestic demand.
India Inc.’s business confidence was the highest in three quarters and it mirrors the robust macro fundamentals of the Indian economy, as per a survey by India’s largest industry body Confederation of Indian Industry (CII).
The reading confirms the continued upward trend witnessed in a number of high-frequency indicators during the second quarter, including GST collection, rail and air passenger traffic, and PMIs among others.
In fact, the rise in fast-moving consumer goods (FMCG) sales and inflated agriculture incomes in Q1 FY24 has also evidently provided momentum to the rural economy.
The survey's findings, which showed that nearly half of respondents (52%) expect an increase in rural demand in the first half of the current fiscal year, were consistent with the recent uptick being witnessed in rural demand.
“The improvement in the CII Business Confidence Index to a three-quarter high in the second quarter of FY24 is encouraging and reiterates the on-ground experience of most of the industry players. The expectation of an improvement in rural demand is reassuring and is much required for the inclusive growth of the economy,” says Chandrajit Banerjee, director general, CII, while commenting on the findings of the survey.
Around 200 businesses of various sizes from all industry sectors and geographical areas participated in the 124th edition of the CII Business Outlook Survey, which was conducted in September 2023. The majority of the respondent firms belong to the manufacturing industry, and notably, 54% of all companies fall into the large and medium size group.
Nearly 66% of respondents believe that the Indian economy would expand by between 6.0 and 7.0% in FY24, which is roughly in line with the predictions of the RBI and other multilateral agencies. On the topic of interest rates, more than half of the respondents (58%) believe that the RBI would continue to hold the repo rate steady throughout the second half of the current fiscal year to give the system time to adjust to the lag effects of the rate hikes that have already been implemented.
Furthermore, the report says that the government has recently announced a number of supply-side measures in an effort to curb the escalating inflationary pressures. Out of the key measures imposed, one-third of the survey respondents noted that imposing export duties on commodities will be most beneficial to tame inflationary pressures, followed by open market operations which was put forth by 26% of the respondents.
Close to 55% of the respondents believe that improving the ease of doing business along with the government's sharp focus on capital spending, especially in infrastructure-related sectors will help further crowd in private investments. This is expected to stimulate growth in other sectors of the economy through its multiplier effect, says the report.
Besides this, an improvement in the domestic demand in the economy has bolstered the sentiments of the companies. Two-thirds of the respondents expect sales and new orders to increase in Q2 FY24 at a higher clip than in the previous quarter. Mirroring this, half of the respondents, nearly 53%, feel that capacity utilisation in their company would range between 75-100% during Q2 FY24.