India Inc's business confidence index at six-quarter low: Ficci survey

India Inc is not as confident about the overall economy and performance of its companies in the second quarter of the current financial year as it was in each of the previous five quarters, showed a survey conducted by the Federation of Indian Chambers of Commerce and Industry (Ficci) here.

The Business Confidence Index (BCI), as measured through the responses of 130 companies from a number of sectors, plunged to its lowest level of 66.3 points in six quarters for July-September 2015-16 compared to 73.2 points in the March to June quarter of the financial year.

The surveyed companies from sectors such as steel, food processing, oil and gas, infrastructure, etc, were less optimistic about the current conditions as compared to previous six months as well as expectations in the near term.

While the current condition index was down to 61 points in the second quarter of the current financial year from 65.2 points in the previous quarter, the expectation index dipped to 68.9 points from 77.2. About 78 per cent of the respondents said they foresee an improved performance at the economy level in the coming six months; the corresponding figure during the previous survey was 94 per cent. Ficci said this perception of respondents finds ground in the actual economic data as well; a firm rebound in the economy still remains elusive.

At the industry level, 71 per cent of the respondents cited a better performance in the coming six months in the present round, vis-à-vis 87 per cent stating the same last time.

The survey also pointed to the weak corporate performance for the first quarter of FY16. The capacity utilisation rate of companies remained low with about half of all respondents reporting they were operating at below 75 per cent capacity. In addition, results with regard to operational parameters indicated mixed signs. Compared to the previous round, the proportion of respondents anticipating an increase in investments and employment, however, noted an increase in the survey. Respondents were gloomy on the matter of profits, with those anticipating a decline spiking to 17 per cent from three per cent, while the proportion of respondents foreseeing higher profits increased cautiously from 32 per cent during the last round to 37 per cent.

As for sales and exports, lower percentage of respondents believed there would be an increase in figures. Weak demand situation has been cited to be a concern by almost 71 per cent of companies, being a persistent concern for almost a year.

Despite the Reserve Bank of India (RBI) undertaking three rounds of cut in the repo rate this calendar year, cost of credit was reported to be a bothering factor by 58 per cent of the respondents. Banks have cut the lending rate by 25-30 basis points (bps) and, hence, a full transmission of the cuts in the repo rate is yet to be seen.

The survey also noted an increasing proportion of respondents citing threat of imports to be a constraint. Those indicating imports to be a concern belonged to sectors like steel, agricultural machinery, food processing, electronics, plastic products and chemicals.