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The percentage of firms expecting overall economic conditions to improve in the next six months had gone up in the East and the North but had gone down in the West and the South, NCAER said.

NEW DELHI, May 20

BUSINESS Confidence Index (BCI) being monitored by the National Council of Applied Economic Research (NCAER) post-Budget shows a drop of 2.9 percentage point over its level of 114.8 in the previous round.

According to the quarterly Business Expectations Survey (BES) of April 2003, the turbulent and volatile conditions in West Asia leading to Iraq war has had its impact on surging BCI, which for the first time since October 2001 has revealed a downturn.

The downswing in BCI is accompanied by lower ratings for investment climate and financial position of the firms in this round.

While across the sectors consumer durables were least optimistic, across the regions South appeared to be least optimistic about the business prospects. The percentage of firms expecting overall economic conditions to improve in the next six months had gone up in the East and the North but had gone down in the West and the South, the council said.

Across the size class, smaller firms were more optimistic than the larger firms, the council said adding that the flip-flop in the business outlook of public sector continued, as they had once again become less optimistic in this round of survey.

Even as there was some variation in the pattern of positive and negative impact of the Union Budget 2003-04 across sectors, by and large industry seemed to have taken it in its stride, it said.

Satisfaction level with regard to the treatment of taxes namely corporate income-tax and excise and customs duty in this Budget is more pronounced in the case of consumer non-durable sector as compared to other sectors.

Despite the subdued business sentiments in this round, firms are expecting their sales, exports as well as production to go up during the next six months. Term loans obtained by larger firms are on a relatively lower rate of interest as compared to smaller firms. But, in case of long-term loans a higher proportion of both smallest and largest size category of firms as compared to other category of firms were found to be obtaining loans at a lower rate of interest.

The council said a higher proportion of large firms expects their expenditure on IT equipment/ software to go up in the coming six months. On the sectoral basis, this trend is somewhat more pronounced for firms belonging to services sector, it said.

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