The business optimism of India Inc has increased for the second quarter of 2011, though some signs of cautiousness are visible, following increased concerns of high inflation and rising interest rates, consultancy firm Dun and Bradstreet said.
"Composite Business Optimism Index stands at 183.3 during Q2 (April-June), 2011, an increase of 28.4% as compared to Q2, 2010. On a quarter-on-quarter basis, the index recorded an increase of 7.1%," it said in a survey.
The survey was conducted in March this year, following announcement of Union Budget.
Based on the responses received, it was observed that three out of the six optimism indices - namely, selling prices, inventory levels and employee levels have registered an increase as compared to first quarter of 2011.
However, cautiousness in business sentiment on account of high inflation and expected hardening of interest rates is visible from relatively lower optimism with regards to volume of sales, new orders, and net profits during the second quarter of 2011 as compared to first quarter of 2011.
"Although the business optimism has continued to rise during Q2, 2011, some signs of cautiousness are visible in the relatively lower resultant optimism for volume of sales, net profits and new orders as compared to Q1, 2011, following increased concerns of high inflation and rising interest rates," D&B India President & CEO Kaushal Sampat said.
Going forward, Sampat said, the performance of the monsoon, which is a critical determinant of food inflation as well as rural demand, will be crucial in influencing the business sentiment.
Food inflation fell to a four-month low of 9.18% for the week ended March 26, even as wholesale price inflation stood at 8.31% in February.
"Major policy announcements -- both on the monetary and fiscal front -- would also play an important role in shaping business sentiment in the ensuing quarter. The emerging geo-political situation in the Middle-East and North Africa would be an important determinant of business sentiment in the coming future," he added.
