CII business confidence index rises to 67.1 in second quarter of FY24

CII's business confidence index improved to 67.1 in the July-September quarter of FY24, reflecting robust macro fundamentals of India's economy despite global headwinds, the industry body said on Sunday.

The index showed a reading of 66.1 in the previous quarter (April-June FY24) and 62.2 in the same quarter last year.

"The reading reaffirms the sustained positive momentum seen in host of high frequency indicators such as GST collection, air & rail passenger traffic, PMIs, among others in the second quarter," said the Confederation of Indian Industry (CII).

The buoyancy seen in rural demand in the recent period, too, was mirrored by the results of the survey which established that nearly half of the respondents (52 per cent) anticipate an improvement in rural demand in the first half of the current fiscal, it added.

A majority of the respondents (66 per cent) feel that the Indian economy will grow in the range of 6-7 per cent in FY24, broadly in line with the forecast of RBI and other multilateral agencies.

On interest rates, more than half of the respondents (58 per cent) anticipate that RBI will stick with a pause on the repo rate in the second half of the current fiscal to let the lagged impact of the rate hikes effected so far to work through the system.

Chandrajit Banerjee, Director General, CII, said, "The improvement in CII Business Confidence Index to a three-quarter high in the second quarter of FY24 is encouraging and reiterates the on-ground experience of most of the industry players. The expectation of an improvement in rural demand is reassuring and is much required for the inclusive growth of the economy."

The survey results highlighted that about 55 per cent of the respondents are of the view that improving ease of doing business along with government's thrust on capital spending, especially in infrastructure related sectors will help further crowd-in private investments.

This will stimulate growth in other sectors of the economy through its multiplier effect, CII stated on the surveys findings.

The chamber further observed that improving domestic demand in the economy has bolstered the sentiments of the companies.

According to the survey, two-third of the respondents expect sales and new orders to increase in the second quarter of FY24 by a higher clip than in the previous quarter.

Mirroring this, half of the respondents (53 per cent) feel that capacity utilisation in their company would range between 75 and 100 per cent during Q2FY24.

"It is heartening to note that in the last two surveys too, majority of the respondents had expected their capacity utilisation to be in range of 75-100 per cent, which is an encouraging sign as capacity utilisation needs to be maintained between 75-80 per cent to fuel fresh investments in the economy," highlighted Banerjee.

To tame the rising inflationary impulses, the government in the recent months has announced a slew of supply-side measures. Notably, out of the key measures imposed, one-third of the survey respondents noted that imposing export duties on commodities will be the most beneficial to tame inflationary pressures, followed by open market operations (26 per cent of the respondents).

The 124th round of the CII Business Outlook Survey was conducted during September 2023 and saw the participation of around 200 firms of varying sizes and across all industry sectors and regions of the country. Majority of the respondent firms were from the manufacturing sector and notably, 54 per cent of overall firms belonged to the large & medium size cohort.