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The CII Business Confidence Index rose to 66.1 in April-June from 64 in the previous quarter, reflecting the positive momentum in a host of high frequency indicators such as GST collection and air & rail passenger traffic.
Majority of the over 180 firms surveyed in the Business Outlook Survey (63 per cent) expect India's GDP growth to be 6-7 per cent in the current fiscal, decelerating from 7.2 per cent in the previous year, attributing it to global headwinds and uncertainties.
"It is important for the RBI to stick with a pause on the interest rate to preserve the growth impulses. This was emphasised in the survey results, as 53 per cent of the respondents expected the RBI to maintain status quo on the key interest rates in the first half of the current fiscal," CII stated.
Notably, 65 per cent respondents are of the view that the fresh sightings in private investment will be sustained in the current fiscal.
There are several factors which are driving private capex such as deleveraged corporate balance sheets, which has in turn increased the capacity of the corporates to invest once there is clear visibility on demand, CII stated.
The survey results also show that 62 per cent of respondents expect muted global growth and geopolitical turbulence as the key business concerns in the current fiscal.
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Chandrajit Banerjee, Director General, CII said, The positive momentum seen in CII Business Confidence Index in the first quarter of the current fiscal is encouraging and reiterates the on-ground experience of most of the industry players. The improvement in demand has translated into an improvement in capacity utilisation in many sectors which will lend further impetus to private capex this year".
The interest rate pause by the RBI is expected to bring down the cost of capital for India Inc, thus fuelling fresh investments and giving private capex a further leg-up, the survey showed.
There are already signs of increase in capacity utilisation of the respondent companies, with more than half (52 per cent) expecting it to stand in a range of 75-100 per cent in April-June, up from 45 per cent in the previous quarter, it observed.
Nearly half of the respondents (47 per cent) expect an increase in employment in the first quarter of the current fiscal (Q1FY24) as compared to 43 per cent in the previous quarter.
Mirroring the improvement in business sentiments, expectations for the June quarter FY24 have turned sanguine as well, with a majority of the respondents anticipating an increase in sales (55 per cent) and count of new orders (57 per cent).
Consequently, the profit outlook for the quarter has strengthened as over one-third of the respondents (38 per cent) foresee an increase in profits, despite the majority of them indicating high input costs.
The Indian economy stands as a beacon of growth amidst choppy global scenario buttressed by softening inflation and government capex. While the lagged impact of RBI's rate hikes will take some bite off growth, a well capitalised financial system and healthy corporate balance sheets will support growth, highlighted Banerjee.
The 123rd round of the Business Outlook Survey was conducted during May-June 2023 and saw the participation of more than 180 firms of varying sizes and across all industry sectors and regions of the country. 64 per cent of firms belonged to the MSME sector.
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