Business confidence ebbing: CII

India Inc is expecting a decline in growth prospects. According to the Confederation of Indian Industry's (CII's) 62nd Business Outlook survey, the Business Confidence Index for the second half of the financial year has dropped by 1.2 points to 64.8.

This is the first decline in the index since its launch in March 2003. In the first six months, India Inc was upbeat on growth, expecting the economy to grow over 7 per cent.

However, the survey for October 2004-March 2005 shows that 37 per cent of the respondents expect GDP growth to be between 6 per cent and 6.5 per cent for the current financial year.

While 26 per cent of the companies questioned feel growth in 2004-05 will be 6.5-7 per cent, an equal number of companies say the economy will grow 5.5-6 per cent. The rest (11 per cent) feel growth will be below 5 per cent.

However, the companies are expecting an improvement in their own functioning: the index for own company has increased by 2.1 points to 70.

Most companies are looking at fresh investment in existing business units. Nearly 17 per cent of the respondents do not want to make any further investment this year. The expected capacity utilisation in the next six months for most respondents is between 50 per cent and 75 per cent.

Around 22 per cent of the respondents feel it will be below 25 per cent and only 5 per cent are eyeing capacity utilisation of over 100 per cent.

On the value of production, the survey reveals that 81 per cent of companies see an increase in the next six months. Around 19 per cent of the respondents are expecting it to remain unchanged. Over the past six months, 79 per cent of the respondents experienced an increase in their value of production, 20 per cent had no change and 1 per cent posted a decline.

Orders are likely to see a new high, with 78 per cent of the respondents expecting an increase in the next six months. Around 21 per cent feel there will be no change and the rest (1 per cent) say there will be a fall in the number of new orders.

Nearly 89 per cent of the respondents said the prices of raw materials increased in the last six months, and 70 per cent see an increase in the October-March period.

Most companies said they would not reduce their workforce, with 42 per cent of the respondents saying they will recruit more and 53 per cent saying the employment level will remain constant. Only 5 per cent feel there will be a fall in their workforce.