Buoyed by policy continuity and post election economic momentum, the CII Business Confidence Index (CII-BCI) rose to a two-quarter high of 68.2 in the second quarter of the current fiscal.
This is an improvement from the reading of 67.3 in the previous quarter (Q1 FY25) and 67.1 in the corresponding quarter last year (Q2FY24).
The increase in the index can be attributed to improving domestic demand amidst a weak external environment and rising shipping costs.
Despite global uncertainties, growth is expected to strengthen, supported by improvement in consumption, rural demand and private investment.
128th round
The 128th round of CII Business Outlook Survey was conducted in the month of September 2024, covering more than 200 firms of varying sizes and across all industry sectors and regions.
In tandem with the improvement seen in the business prospects, industry has responded positively on the availability of employment opportunities across sectors. Almost half of the respondents anticipate an improvement in the hiring situation in their companies during the second quarter.
Industry is sanguine on the business sentiments as exhibited by the upward trajectory seen in the CII Business Confidence Index which surged to a two-quarter high in July-September period. The upcoming festive season portends well for fortifying growth prospects further. That said, the uncertainty in the global scenario persists, necessitating a careful watch on the evolving economic conditions, according to CII.
As many as 59 percent of respondents anticipate an improvement in private capex in first half of 2024-25 as compared to second half of 2023-24.
Domestic demand
The upbeat prognosis on private investment is attributable to an improvement in domestic demand. The latter got mirrored in the survey result which highlighted that more than half of the respondents anticipate sales and count of new orders in their companies to increase in the July-September quarter. Consequently, most of the respondents (46 per cent) feel that the capacity utilisation levels in their company would range between 75-100 per cent during the quarter ending September 2024. This level is higher than the proportion witnessing such capacity utilisation levels in the previous quarter. Moreover, capacity utilisation between 75-80 per cent is a propitious sign as it helps to fuel fresh investments in the economy.
As for expectations on CPI inflation, 78 percent of respondents expect it to be less than 5 percent in 2024-25. More than a quarter of the respondents expect RBI to cut its key policy interest rates by the end of the current fiscal.
Almost 34 per cent of the respondents anticipates RBI to begin with its rate cutting cycle by Q3FY25. While another 31 percent of them expect the central bank to cut rates by Q4FY25.
“With banking liquidity in surplus, in recent period, we can expect the central bank to provide some easing in interest rates or at least a change in policy stance in the upcoming monetary policy in October”, CII Survey has said.
The Survey found that Indian economy has shown remarkable resilience and strength despite the uncertainties stemming from global economic and geopolitical conditions.
Rural demand
Nearly 17 percent of the respondents feel that improvement in consumption, especially rural demand is poised to significantly bolster economic growth in the current fiscal.
“Moreover, steady progress in monsoon and higher Kharif crop sowing, fresh sightings in private investment along with continued emphasis on reforms despite the coalition government, are expected to further boost the growth momentum in FY25”, CII survey has said.
Economic momentum has gained speed post the general elections, CII has said.
A few niggling business concerns have been highlighted by the respondents in the survey with protracted geopolitical tensions, spike in global commodity prices and slowing external demand being the top three ones.