Buoyancy seen in rural demand in the recent period, says business outlook
A majority of the respondents, 66%, to the CII Business Confidence Index feel that the Indian economy will grow in the range of 6.0%-7.0% per cent in FY24, broadly in line with the forecast of Reserve Bank of India (RBI) and other multilateral agencies.
More than half of the survey respondents, 58%, anticipate that RBI will stick with a pause on the repo rate in the second half of the current fiscal to let the lagged impact of the rate hikes effected so far to work through the system.
The 124th round of the CII Business Outlook Survey was conducted during September 2023 and saw the participation of around 200 firms of varying sizes and across all industry sectors and regions of the country. Majority of the respondent firms were from the manufacturing sector and notably, 54%, of overall firms belonged to the large and medium size cohort.
The robust macro fundamentals of the Indian economy despite the global headwinds got mirrored in an uptick of the CII Business Confidence Index (CII-BCI) to a three-quarter high of 67.1 in the Jul-Sept quarter FY24 as compared to a reading of 66.1 in the previous quarter and 62.2 in the same quarter last year.
The reading reaffirms the sustained positive momentum seen in host of high frequency indicators such as GST collection, air and rail passenger traffic, PMIs among others in the second quarter.
The buoyancy seen in rural demand in the recent period, too, was mirrored by the results of the survey which established that nearly half of the respondents (52%) anticipate an improvement in rural demand in the first half of the current fiscal.
Commenting on the latest findings of the 124th CII Business Outlook Survey, CII Director General Chandrajit Banerjee said on the 7 Oct release of the survey, “The improvement in 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.”
To tame the rising inflationary impulses, the government in the recent months has announced a slew of supply-side measures. Notably, out of the key measures imposed, one-third of the survey respondents noted that imposing export duties on commodities will be the most beneficial to tame inflationary pressures, followed by open market operations (26% of the respondents).
The survey results highlighted that about 55% of the respondents are of the view that improving ease of doing business along with government’s thrust on capital spending, especially in infrastructure related sectors will help further crowd-in private investments. This will stimulate growth in other sectors of the economy through its multiplier effect.
Improving domestic demand in the economy has bolstered the sentiments of the companies. Two-third of the respondents expect sales and new orders to increase in 2QFY24 by a higher clip than in the previous quarter. Mirroring this, half of the respondents (53%) feel that capacity utilisation in their company would range between 75-100% during Q2FY24.
“It is heartening to note that in the last two surveys too, majority of the respondents had expected their capacity utilisation to be in range of 75-100%, which is an encouraging sign as capacity utilisation needs to be maintained between 75-80% to fuel fresh investments in the economy,” said Banerjee. Fiinews.com
