 "Private sector capex likely to improve among rising biz confidence: CII")
Private capital expenditure by India Inc. is likely to increase amid improving domestic demand despite a weak external environment and rising shipping costs, a survey by Confederation of Indian Industry (CII) showed.
The survey, conducted with over 200 firms of varying sizes, showed that CII's Business Confidence Index between July and September (Q2 FY25) rose to its highest since March at 68.2.
In the previous quarter, it was 67.3 while in Q2 FY24, the figure was 67.1.
It added that 59 per cent of respondents anticipate an increase in private capex during April-September compared to the previous six months.
“Improvement in domestic demand has created a more optimistic business environment, encouraging companies to invest and expand,” the survey said.
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“A significant portion of respondents also believe that the trajectory of private capex will remain unchanged in the first half. Only a small fraction (6 per cent) expects the level of private capex to deteriorate compared to the second half of FY24,” it added.
On the back of a favourable monsoon, 78 per cent of respondents said they see inflation this year to be below 5 per cent. Of these, 33 per cent say it is likely to be between 4.5 and 5 per cent.
Around 35 per cent say it is expected to be in the range of 4-4.5 per cent.
The Reserve Bank of India (RBI) has said inflation is likely to be around 4.5 per cent this year.
Over 60 per cent of the respondents felt that the RBI would begin its rate-cutting exercise this financial year.
Of these, 34 per cent said it is likely to slash rates in the October-December quarter. Another 31 per cent said it would start happening during the January-March quarter.
“With banking liquidity in surplus recently, we can expect the central bank to provide some easing in interest rates. Or, may be, at least a change in policy stance in the upcoming monetary policy in October,” the survey said.
Owing to improved domestic demand, especially from rural India, a majority of companies said their capability utilisation levels were in the range of 75-100 per cent (46 per cent) and above 100 per cent (6 per cent) during April-June.
“This is higher than the proportion of respondents (45 per cent) who had experienced capacity utilisation levels in the same range in the previous quarter as well,” the survey noted.
As many as 45 per cent of companies also said that their profits will improve in the July-September quarter. This is marginally higher than 42 per cent who experienced a similar trend in the previous quarter.
Employment opportunities are likely to rise but not by much.
Around 49 per cent of companies said there has been an improvement in their employment situation. However, 41 per cent say there is no change during the quarter.
However, owing to external uncertainty, a significant portion of companies (40 per cent) are likely to see their international investment plans unchanged.