CII business outlook shows signs of economic turnaround

The economic slowdown "may have bottomed" with the Confederation of Indian Industry (CII) business confidence index (BCI) rising sharply to 54.9 during the October- December period of this fiscal from 45.7 in the previous quarter.

"With positive signals emanating from the global economy, which finds a resonance in our improved export performance and is causing our current account deficit (CAD) to decline, we believe that the slowdown in the domestic economy may have bottomed out in the second quarter and the trend could reverse henceforth," CII director general Chandrajit Banerjee has said.

According to the survey, the pick- up in BCI for the current quarter comes as a major relief for the economy, which has been braving the onslaught of the slowdown for the last several quarters and awaiting the return of growth.

The survey also strikes a note of caution saying that the downside risks to growth have still not abated and supply-side bottlenecks continue to pose a problem.

Despite the likelihood that subsidies will cross the budgeted target by a wide margin, and the impending general elections pose upside risk to government expenditure, as many as 53 per cent of the survey respondents expect fiscal deficit to remain below the five-per cent mark, broadly in line with the government's target.

But Banerjee warned about the upward risk to fiscal deficit amid the scenario of weak economic growth, which can translate into sluggish tax collection. Besides, the top five concerns in order of severity to most firms which participated in the survey were: domestic economic and political instability, slackening consumer demand, high level of corruption, persistent high inflation and risk from exchange rate volatility.

A majority of the respondents (42 per cent) felt that GDP growth this fiscal would settle in the range of 4.5-5 per cent whereas only 28 per cent expected it to be in the vicinity of 5- 5.5 per cent. Moreover, 63 per cent of the respondents expect CAD to settle in a range of 3.5- 5 per cent of GDP in 2013- 14 and only seven per cent expect it to fall below 3.5 per cent this fiscal.

High inflation also poses downside risk to growth as 41 per cent respondents expected inflation to cross the seven-per cent mark in this financial year. The survey reveals that 58 per cent of the respondents expect an increase in their sales in the third quarter.

Courtesy: Mail Today