The 51st survey, based on the responses of 400 member corporates spread across small, medium and large enterprises in different regions, conducted six months ago showed the business confidence in the country had dipped to a two-year low.

The survey shows that the majority of the respondents expect improvement in several factors such as a step-up in production, increase in the total order position, capacity utilisation and a pick up in retail sales. The expectations regarding profit margins for the next six months have also improved, the survey added. The survey, however, stated that despite investment intentions the respondents remained modest in terms of quantum of investment.

As against the last survey the respondents intending to authorise a higher capital expenditureexpect only a 5-10 per cent rise in it.

CII survey further reflected the return of stability on the price front and the continued fall in the weekly rate of inflation. The survey showed that there is near unanimity among the respondents that the rate of inflation would remain within the single digit levels.

For the majority of the respondents, the improved outlook for business is also expected to translate into an increase in employment, the survey said.Political instability as a constraint to growth was rated the highest during the past six months.

Further, it is foreseen to be a major hurdle in the next six months.The other internal variables that have contributed to restricting output include, the high cost of funds and a lack of ordersfrom the government and domestic customers. Apart from this the respondents also rated very high bank paperwork and bureaucracy as well as the collateral requirement of the banks.

They however, did not agree with the view that there is a paucity if funds in thecountry's banking system. A majority of the respondents cited increasing integration with the global economy as a major factor in the rising incidence of external variables.

They stated that global economic slowdown and lack of overseas orders as factors affecting their performance. CII survey reflected that after a dismal performance in the first three quarters of the fiscal 1998-99 a 10.7 per cent growth in the March 1999 over March 1998 as a return of optimism amongst exporting respondents.