‘India Inc.’s confidence at 6-year peak’

India Inc.’s perceptions about the state of the economy slid in the last quarter of 2016-17, yet industry’s confidence levels about the future have peaked to their highest level in more than six years, as per the CII Business Confidence Index released on Sunday.

The Business Confidence Index that has been compiled for the last 25 quarters, based on responses from more than 100 firms, has surged to an all-time high of 64.1 in the January-March 2017 quarter, as against 56.5 recorded in the previous 3-month period.

The sharp improvement in business sentiment was primarily driven by an uptrend in the ‘Expectations’ component of the index, while perceptions about the current situation only improved marginally.

The Expectations Index rose due to a strong improvement in sentiment across categories, while the Current Situations Index rose despite a drop in sentiment about the overall economy, the Confederation of Indian Industry (CII) noted. The latter index, it pointed out, reflects the sentiment of industry in the October 2016 to December 2016 quarter when ‘the demonetisation announcement had engendered uncertainty’ and responses could have been influenced by its transitory disruption.

“The turnaround in business expectations, as indicated in the survey, gives credence to the belief that a new growth narrative is being scripted for the country based on improved business sentiment and investor confidence,” said CII director general Chandrajit Banerjee.

“A sharp uptick in business outlook at the onset of 2017, underpins the hope that the government’s reform initiatives would unravel a host of investment opportunities for firms going forward,” he added. Incidentally, more than 40% of the 100-odd industries surveyed for the index expect the official GDP growth estimate of 7.1% for 2016-17 to be revised downward, while 37% expect growth to see an upward revision.

Own firms

Within the current situation index which rose from 57.2 in the previous quarter to 58.5 in the January 2017 to March 2017 quarter, the improvements were driven by assessment of one’s own sector or firm. The index for confidence about the overall economy fell from 56.7 to 54.4.

By contrast, the Expectation Index which rose from 56.1 in the third quarter of 2016-17 to 66.9 in the last quarter, firms had turned more bullish about the prospect of the entire economy and the sectors they operate in.

It would take a year for the economy to register the positive impact of the Goods and Services Tax regime the Centre expects to rollout from July 1, according to 52% of the respondents.