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Business confidence at highest level since Nov '94: NCAER

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In line with industrial production, manufacturing sector GDP trend


Buoyancy
The Council said that in line with the trend of index of industrial production growth, capital goods sector is the flag-bearer of upbeat sentiments.
It contributed the maximum towards the gain in BCI with this segment witnessing the gain of 7.7 per cent followed by intermediate goods sector (2.2 per cent).

New Delhi , April 14

The Business Confidence Index (BCI), a barometer monitoring the moods and moves of the India Inc, has touched the highest point in the first quarter of 2006 (January-March) to 154 since November 1994, the National Council of Applied Economic Research (NCAER) said here.

Although, the BCI is reflecting an increasing trend from October 2001, its growth momentum from April last year is petering out, the Council said.

It added that increase in business sentiments and retardation in pace of growth of the BCI is more or less in line with the growth trend of industrial production and manufacturing sector GDP.

The rating for macro indicators — overall economic conditions and the investment climate — rose by 2.5 percentage points and 2.2 percentage points respectively.

Macro indicators

The rating for firm level indicator — the financial position of the firm — deteriorated by 0.7 percentage points, whereas rating for other micro indicator — capacity utilisation — increased by 1.1 percentage points.

Increasing industrial production, buoyant exports and more than 8 per cent GDP growth in 2005-06 are some of the reasons for positive macro sentiments.

But impact of rising interest and commodity prices in the form of oil prices is being reflected on the future financial position of firms.

The Council said that in line with the trend of index of industrial production growth, capital goods sector is the flag-bearer of upbeat sentiments and contributed the maximum towards the gain in BCI with this segment witnessing the gain of 7.7 per cent followed by intermediate goods sector (2.2 per cent).

Consumer goods

For consumer goods sector, both macro indicators pulled down sentiments, while for services sector both macro indicators and financial position pulled down sentiments.

"A bullish sentiment from intermediate goods sector despite a sharp decline in IIP growth this year and bearish sentiment of services sector firms is a conundrum," the Council said.

While firms from all regions except the southern region reported an upward swing in the business confidence, firms belonging to the top category (more than Rs 500 crore) revealed swing in the business confidence.

PSU push

Public sector and public limited firms pushed up the growth of the BCI in the latest round, whereas partnership/individually owned firms pulled it down. Overall, 0.6 per cent more firms expect an increase in their exports in the next six months.

On the 2006-07 Union Budget, more than 75 per cent firms are satisfied with corporate tax proposals, the same for excise duty and import duty proposals are 72.7 per cent and 73.3 per cent respectively.

More than 30 per cent firms believe that the Budget has positive impact on their investment plans, while 61 per cent opined otherwise.

The Council survey showed that nearly 64 per cent firms plan to invest in 2006-07, compared with 50.4 per cent after the previous Union Budget 2005-06.

Of those who want to invest, 40 per cent are planning for capacity expansion, 20 per cent for new business line and 40 per cent for quality/ efficiency improvement.

Related Stories:
NCAER pegs GDP growth at 7.8 pc — `Inflation, stocks had good run'
Business confidence index up 1.3 pc: NCAER

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