About 64% of respondents feel that the GDP growth in 2018-19 will be between 6.5%-7.5% while 60% expect inflation to remain 4-5% during the year, according to a CII survey of about 200 companies.
“A majority of respondents (64%) feel that GDP growth will lie in the range of 6.5-7.5% in 2018-19,” CII’s Business Confidence Index (CII-BCI) report for the July-September 2018 quarter said. “Among them, a large proportion (36%) expect GDP growth to lie in the range of 7-7.5% while about 28% foresee GDP growth in the 6.5-7.0% range.”
The overall index reading—a composite of two sub-indices, the Current Situation Index and the Expectation Index—improved significantly to stand at 64.9, its highest level so far.
Business outlook
The reading has moved upwards for the fourth consecutive quarter and has risen 8% over the previous quarter’s reading of 60.1, which the report notes indicates a strong improvement in business sentiment. “Significant proportion of the respondents (60%) feel that inflation will lie in the 4-5% range in 2018-19,” the report added.
“It is interesting to note that the recent uptick in inflationary pressures has revised inflation expectations upwards since in the previous survey nearly 40% of the respondents anticipated inflation in the 4-5% range in 2018-19.” The Reserve Bank of India’s recent action in the last two monetary policy review meetings, in which it hiked rates by a total of 50 basis points, has changed industry’s expectation of the central bank’s future actions, according to the report.
“In the current survey, about 42% of the respondents felt that the RBI will engage in further interest rates hikes in 2018-19 as compared to the previous survey where a majority of the respondents anticipated a cut or no change in policy rates in 2018-19,” the report said. Significantly, the survey found that 65% of the respondents feel that private investment activity will pick-up in 2018-19, of which 26% feel that an improvement in investment activity is already visible while the remaining 16% and 23% of the respondents anticipate a pick-up in the remaining two quarters of 2018-19. The respondents also felt that the implementation of the GST had eased taxpaying process and made the taxation system more transparent. GST was implemented more than a year ago and though there were some initial hurdles in its implementation, the new tax system has been widely accepted as a step in the right direction,” the report said. “This is evident from the fact that a majority of the respondents have reported an improvement ease of doing business with about 76% of them finding it easier to pay taxes while 81% of them feel that the new taxation system is more transparent than the previous one.”
