Business Confidence Index improves: NCAER

By Our Special Correspondent

NEW DELHI, FEB. 3. The National Council of Applied Economic Research (NCAER) has found a dramatic improvement in the Business Confidence Index (BCI) through a survey conducted in December 1999.

The NCAER normally conducts business expectation surveys to construct its quarterly BCI. The survey in December 1999 suggested improvement in the perception of respondents on all counts - the overall economic situation, financial position, capacity utilisation and investment climate. The BCI in the latest round rose significantly to 107.3 points, up from around 75 points recorded in the last survey.

According to NCAER, the improved sentiment appears to be a result of the stability in political conditions, bullishness of the stock market, low inflation, growth in exports, rise in foreign exchange reserves and pro-business legislation such as the Insurance Regulatory and Development Authority Act and the Foreign Exchange Management Act. On the upside, the confidence level improved sharply in consumer durables and services.

According to the survey, businesses expect acceleration in sales, production and exports and imports of finished products. However, despite the sharp improvement in business sentiment, the NCAER survey found that inflation was expected to rise, hiring of unskilled workers was expected to decline in the next three months and export of services not expected to be buoyant. Also, respondents expect excise, customs and income taxes to rise in the coming Budget.

Companies in the capital goods and consumer non-durables sectors were less euphoric and large firms (with turnover of Rs. 100 crores and more) were less optimistic about improvement in financial position. This is consistent with the fall in pre-tax profit of top 175 companies observed last year. Smaller firms (turnover between Rs. 10 crores and Rs. 100 crores) were also less optimistic about improvement in capacity utilisation.

According to NCAER, the dramatic recovery in the Business Confidence Index augurs well for the coming months as this index has in the past proved to be reliable indicator of industrial production. The general and manufacturing indices of industrial production have continued with the rising trend which started in the third quarter of 1998-99 with the IIP (general) and IIP (manufacturing) growing by 6.72 per cent and 6.78 per cent, respectively, in the second quarter of the current fiscal year.

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Section  : Business
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