Business confidence surveys conducted by various agencies point to an improvement in the growth outlook. Indices are reporting a rebound over preceding quarters. Upturn in business expectations is seen across all industries with sectors like transportation, food products, pharmaceuticals and fertilisers looking more optimistic than others.
The Industrial Outlook Survey conducted by RBI in July-August this year for the October-December quarter shows improvement in sentiments in the manufacturing sector, with better expectations on order books, capacity utilisation and production. Working capital finance requirement is expected to grow in October-December quarter, indicating that the demand for credit from the private sector will grow. The survey also says exports, which suffered the most during the downturn, would rise in the October-December quarter. A confidence survey carried out by NCAER shows a 45% increase in the index sequentially. The D&B index shows an almost 41% rise sequentially. But, on a year-on-year basis, the sentiments are still low for both NCAER and D&B.
The confidence surveys show that a part of the rise in industrial production was because of the fiscal stimulus and corporates fear that the rising cost of raw materials, escalation in staff costs and high interest rates may dampen the outlook in the next few months. Respondents expect that the pressure on profit margins will continue, but this would not be as excessive as in the past four quarters. Most notably, the outlook for employment is increasing. However, the textile sector would go slow in hiring and would wait for the global business demand to pick to up before it commits any fresh investment.