India Inc remains sanguine on sustaining fresh sightings in private investment: CII Business Outlook Survey Capex momentum, robust domestic drivers & financial system to drive growth in FY24: CII Business Outlook Survey [CII Business Outlook Survey attached] The robust macro fundamentals of the Indian economy despite the global headwinds got mirrored in the rebound of the CII Business Confidence Index (CII-BCI) to a reading of 66.1 in April-June FY24 (Q1FY24) from 64.0 in the previous quarter. The reading reaffirms the positive momentum seen in host of high frequency indicators such as GST collection, air & rail passenger traffic, PMIs among others in the first quarter. The respondents noted that the robust capex momentum of the government, strong domestic drivers and robust financial system will be the top three drivers of growth in the current fiscal. Commenting on the latest findings of the 123rd CII Business Outlook Survey, Mr Chandrajit Banerjee, Director General, CII said, “The positive momentum seen in CII Business Confidence Index in the first quarter of the current fiscal is encouraging and reiterates the on-ground experience of most of the industry players. The improvement in demand has translated into an improvement in capacity utilisation in many sectors which will lend further impetus to private capex this year”. Indeed, an overwhelming majority of respondents (65 per cent) are of the view that the fresh sightings in private investment will be sustained in the current fiscal. There are several factors which are driving private capex such as deleveraged corporate balance sheets, which has in turn increased the capacity of the corporates to invest once there is clear visibility on demand. Majority of the respondents (63 per cent) expect GDP growth to come in a range of 6.0-7.0 per cent in the current fiscal, which is broadly in line with the 6.5 per cent forecast of RBI and other multilateral agencies. Though growth is expected to decelerate in the current fiscal from 7.2 per cent seen in the previous year, bulk of it is attributed to global headwinds and uncertainties. The survey results also show that 62 per cent of respondents expect muted global growth and geopolitical turbulence as the key business concerns in the current fiscal. It is important for the RBI to stick with a pause on the interest rate to preserve the growth impulses. This was emphasised in the survey results, as 53 per cent of the respondents expected the RBI to maintain status-quo on the key interest rates in the first half of the current fiscal. The interest rate pause by the RBI is expected to bring down the cost of capital for the India Inc, thus fuelling fresh investments and giving private capex a further leg-up. There are already signs of increase in capacity utilisation of the respondent companies, with more than half (52 per cent) expecting it to stand in a range of 75-100 per cent in the Apr-June quarter, up from 45 per cent number in the previous quarter. Apart from reinvigorating investments, another key area of focus for policymakers has been on generating employment opportunities for the burgeoning workforce. The survey results present an encouraging prognosis on the employment front, with nearly half of the respondents (47 per cent) expecting an increase in employment in the first quarter of the current fiscal (Q1FY24) as compared to the actual number of 43 per cent in the previous quarter. Mirroring the improvement in business sentiments, expectations for the Apr-June quarter FY24 have turned sanguine as well, with majority of the respondents anticipating an increase in sales (55 per cent) and count of new orders (57 per cent). Consequently, the profit outlook for the quarter has strengthened as over one-third of the respondents (38 per cent) foresee an increase in profits, despite majority of them indicating high input costs. Nonetheless, input price pressures, though still elevated, have moderated from the previous quarter, with 35 per cent of the respondents expecting raw material costs to remain elevated during the Apr-June quarter as compared to 46.3 per cent in the previous quarter. According to the survey, majority of respondents (71 per cent) expect average brent crude oil price to remain range bound within US$70-80/barrel in the first-half of the year. “The Indian economy stands as a beacon of growth amidst choppy global scenario buttressed by softening inflation and government capex. While the lagged impact of RBI’s rate hikes will take some bite off growth, well capitalised financial system and healthy corporate balance sheets will support growth”, highlighted Mr Banerjee. The 123rd round of the Business Outlook Survey was conducted during May-June 2023 and saw the participation of more than 180 firms of varying sizes and across all industry sectors and regions of the country. 64 per cent of firms belonged to the MSME sector.

2023-07-10

India Inc remains sanguine on sustaining fresh sightings in private investment: CII Business Outlook Survey

Capex momentum, robust domestic drivers & financial system to drive growth in FY24: CII Business Outlook Survey

[CII Business Outlook Survey attached]

123rd CII Business Outlook Survey (Apr-Jun 2023)

The robust macro fun

damentals of the Indian economy despite the global headwinds got mirrored in the rebound of the CII Business Confidence Index (CII-BCI) to a reading of 66.1 in April-June FY24 (Q1FY24) from 64.0 in the previous quarter. The reading reaffirms the positive momentum seen in host of high frequency indicators such as GST collection, air & rail passenger traffic, PMIs among others in the first quarter. The respondents noted that the robust capex momentum of the government, strong domestic drivers and robust financial system will be the top three drivers of growth in the current fiscal.

Commenting on the latest findings of the 123^rd CII Business Outlook Survey, Mr Chandrajit Banerjee, Director General, CII said, “The positive momentum seen in CII Business Confidence Index in the first quarter of the current fiscal is encouraging and reiterates the on-ground experience of most of the industry players. The improvement in demand has translated into an improvement in capacity utilisation in many sectors which will lend further impetus to private capex this year”.

Indeed, an overwhelming majority of respondents (65 per cent) are of the view that the fresh sightings in private investment will be sustained in the current fiscal. There are several factors which are driving private capex such as deleveraged corporate balance sheets, which has in turn increased the capacity of the corporates to invest once there is clear visibility on demand.

Majority of the respondents (63 per cent) expect GDP growth to come in a range of 6.0-7.0 per cent in the current fiscal, which is broadly in line with the 6.5 per cent forecast of RBI and other multilateral agencies. Though growth is expected to decelerate in the current fiscal from 7.2 per cent seen in the previous year, bulk of it is attributed to global headwinds and uncertainties. The survey results also show that 62 per cent of respondents expect muted global growth and geopolitical turbulence as the key business concerns in the current fiscal.

It is important for the RBI to stick with a pause on the interest rate to preserve the growth impulses. This was emphasised in the survey results, as 53 per cent of the respondents expected the RBI to maintain status-quo on the key interest rates in the first half of the current fiscal.

The interest rate pause by the RBI is expected to bring down the cost of capital for the India Inc, thus fuelling fresh investments and giving private capex a further leg-up. There are already signs of increase in capacity utilisation of the respondent companies, with more than half (52 per cent) expecting it to stand in a range of 75-100 per cent in the Apr-June quarter, up from 45 per cent number in the previous quarter.

Apart from reinvigorating investments, another key area of focus for policymakers has been on generating employment opportunities for the burgeoning workforce. The survey results present an encouraging prognosis on the employment front, with nearly half of the respondents (47 per cent) expecting an increase in employment in the first quarter of the current fiscal (Q1FY24) as compared to the actual number of 43 per cent in the previous quarter.

Mirroring the improvement in business sentiments, expectations for the Apr-June quarter FY24 have turned sanguine as well, with majority of the respondents anticipating an increase in sales (55 per cent) and count of new orders (57 per cent). Consequently, the profit outlook for the quarter has strengthened as over one-third of the respondents (38 per cent) foresee an increase in profits, despite majority of them indicating high input costs.

Nonetheless, input price pressures, though still elevated, have moderated from the previous quarter, with 35 per cent of the respondents expecting raw material costs to remain elevated during the Apr-June quarter as compared to 46.3 per cent in the previous quarter. According to the survey, majority of respondents (71 per cent) expect average brent crude oil price to remain range bound within US$70-80/barrel in the first-half of the year.

“The Indian economy stands as a beacon of growth amidst choppy global scenario buttressed by softening inflation and government capex. While the lagged impact of RBI’s rate hikes will take some bite off growth, well capitalised financial system and healthy corporate balance sheets will support growth”, highlighted Mr Banerjee.

The 123^rd round of the Business Outlook Survey was conducted during May-June 2023 and saw the participation of more than 180 firms of varying sizes and across all industry sectors and regions of the country. 64 per cent of firms belonged to the MSME sector.