Notwithstanding the challenges on macroeconomic front, India Inc's business confidence witnessed an improvement for the second consecutive quarter, owing to the government's reforms push and easing inflation, says research firm Dun & Bradstreet (D&B).
For the first quarter of this calender year, the Dun & Bradstreet Composite Business Optimism Index stood at 146.8, registering an increase of 4.3% compared to 140.8, clocked in the fourth quarter (October-December) 2012.
In the fourth quarter of 2012, the Index stood at 140.8, up 3.4% from the July-September 2012.
However, on a year-on-year basis, the optimism for the coming three months still represent a decline of 6% compared to corresponding quarter last year, the report said.
"D&B Optimism Index for the first quarter of 2013 reveals that India Inc continues to show signs of optimism, despite the prevailing challenges on macroeconomic front," Dun & Bradstreet India President and CEO Kaushal Sampat said.
D&B further said business optimism for the first quarter of 2013 stood at a seven-quarter high for three critical parameters like -- volume of sales, net profit and new orders.
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Sampat further said "the stressed position on fiscal and current account, weakening consumer demand and sluggishness in investment activity continue to signal upside risks going ahead."
The gradual build-up in optimism comes on the back of the government reform initiatives, expectations of an easing of inflationary pressures, hopes of a repo rate cut by RBI and moderating global crude oil prices, the report said.
Currently, inflation levels are above the Reserve Bank's comfort zone of 5—5.5%, inflation is showing some signs of easing in recent months, which in turn is likely to prompt the Reserve Bank of India to lower interest rates in the January 29 meeting.
The government has recently taken a number of reform initiatives such as opening the multi--brand retail and aviation sectors to FDI, hiking diesel prices and capping the number of subsidised LPG cylinders.
Besides, the government has also decided to raise the FDI cap in insurance from 26 to 49% and allowing foreign investment in pension.
For calculating the composite BOI, each of the six parameters, net sales, net profits, selling prices, new orders, inventories and employee levels, is assigned a weight.
The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.