Business confidence up but outlook dim: Ficci

The Federation of Indian Chambers of Commerce and Industry's business confidence survey for the third quarter of 2006-07 reveals that the overall business confidence index is at 75.0 compared with 72.1 in the previous quarter.

However, the outlook on investments has taken a hit because of the increase in prices of capital goods coupled with an increase in the cost of credit.

Around 320 companies participated in the Ficci survey. Companies participating in the survey had turnovers between Rs 2 crore-Rs. 89,000 crore. a Ficci release said.

While all the three confidence indices computed by Ficci-the current conditions index, the expectations index and the overall business confidence were in the 'significantly optimistic' zone, the investment index has plunged from 50 in the previous quarter to 39 this time. Lower investments in the near future may have a long-term impact of slowing down the economy, the release said.

Ficci's survey also reveals that companies are continuing to absorb the rise in input prices by maintaining the current price levels. Selling prices are not expected to increase drastically indicating that the current inflation is largely due to a spurt in food prices, the release said.

The sales index also registered a two point increase from 74 in the previous quarter to 76 in this quarter with nearly 78 per cent of the firms reporting 'higher to much higher' sales over the next six months.

Although on the whole the industry remained buoyant, exports and investment expectations over the next 6 months were low.

Ficci's survey also indicates that the government's move to undertake reduction in customs duty on items used as industrial inputs and as capital goods is on the right track.

"It is time for the government to move full steam on structural reform measures that would bolster the supply side," the release said.