CII Business Index shows signs of economic revival

New Delhi: Indicating signs of economic revival, the CII Business Confidence Index (BCI) rose sharply to 54.9 during the October-December period of 2013-14 fiscal, from 45.7 in the previous quarter.

“With positive signals emanating from the global economy, which finds a resonance in our improved export performance and is causing our current account deficit (CAD) to decline, webelieve that the slowdown in the domestic economy may have bottomed out in the second quarter and the trend could reverse henceforth,” CII Director General Chandrajit Banerjee said.

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The pick-up in BCI for the current quarter comes as a major relief for the economy which has been braving the onslaught of the slowdown for the last several quarters and awaiting the return of growth, the survey said.

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However, it also strikes a note of caution saying that the downside risks to growth have still not abated and supply-side bottlenecks continue to pose a problem.

It said that despite the likelihood that subsidies will cross the budgeted target by a wide margin, and the impending general elections pose upside risk to government expenditure,as many as 53 percent of the survey respondents expect fiscal deficit to remain below 5 percent mark, broadly in line with the government’s target.

However, Banerjee cautioned: “We need to be careful about the upward risk to fiscal deficit amid the scenario of weak economic growth translating into sluggish tax collection and growing chances of disinvestment proceeds falling well short of target.”

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Besides, the top five concerns in order of severity to most firms which participated in the survey were: domestic economic and political instability, slackening consumer demand, high level of corruption, persistent high inflation and risk from exchange rate volatility.

A majority of the respondents (42 percent) felt that GDP growth in the current fiscal would settle in the range of 4.5 to 5 percent, whereas only 28 percent expected it to be in the vicinity of 5 to 5.5 percent.

Moreover, 63 percent of the respondents expect CAD to settle in a range of 3.5-5 percent of GDP in 2013-14 and only 7 percent expect it to fall below 3.5 percent in the currentfiscal.

High inflation also poses downside risk to growth, as 41 percent respondents expected inflation to cross 7 percent mark during the current fiscal.

The survey reveals that 58 percent of the respondents expect an increase in their sales in the third quarter of 2013-14, much higher than 45 percent who saw the same during the previous quarter.

Brighter prospects were also observed for exports, as 53 percent of firms expected their exports to increase in the current quarter, up from 49 percent in the previous quarter.

PTI