85th Business Outlook Survey

8/12/2019 85th Business Outlook Survey

1/14

th85 BusinessOutlook Survey

October- December 2013

www.cii.in

Confederation of Indian Industry


2/14

Copyright 2013 by Confederation of Indian Industry (CII), All rights reserved.

No part of this publication may be reproduced, stored in, or introduced into a retrieval system, or transmitted inany form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the priorwritten permission of the copyright owner. CII has made every effort to ensure the accuracy of informationpresented in this document. However, neither CII nor any of its office bearers or analysts or employees can beheld responsible for any financial consequences arising out of the use of information provided hereinHowever, in case of any discrepancy, error, etc., same may please be brought to the notice of CII forappropriate corrections.

Published by Confederation of Indian Industry (CII)The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi-110003 (INDIA)T: +91-11-24629994-7; F: +91-11-24626149; E: [email protected]; W: www.cii.in


3/14

Contents

th85 Business Outlook Survey : Oct. - Dec. 2013

Highlights 1

Business Confidence Index 2

General Economic Prospects 3

General Business Prospects 5

Overall Trends 6

Export and Import Trends 9

Business Concerns 10

Coverage & Methodology 10


4/14


5/14

Business Confidence Index

Indicating sharp improvement in investors sentiments, the CII Business Confidence Index (CII-BCI) for Oct- Dec 2013 quarter increased sharply to 54.9 from 45.7 in the previous survey.Breaching the psychological 50-level mark, index reached its highest value since Q2FY13. Thepick-up in BCI for the current quarter comes as a silver lining for the economy, which is otherwisedevoid of any positive news. However, it should also be approached with a bit of cautiousoptimism as the downside risks to growth have still not abated from the horizon.

The respondents in the survey were asked to provide a view on the performance of their firm,sector and the economy based on their perceptions for the current and next quarter. The CII-BCIis then constructed as a weighted average of the Current Situations Index (CSI) and the

Expectation Index (EI). It is significant to note that both current as well as expectation indicescontributed to the sharp increase in BCI. In both indices, respondents rated the situation toimprove drastically with respect to all constituents - overall economy, sector, and own activity.

2


Index

Business ConfidenceIndex

Current Situation Index

Overall Economy

Own Activity Sector

Own Company

Expectation Index

Overall Economy

Own Activity Sector

Own Company

Q3*FY11

66.2

64.0

65.0

63.2

64.3

67.3

66.0

66.3

68.4

Q4FY11

66.7

62.7

59.9

63.0

63.4

68.7

65.6

68.8

69.7

Q1FY12

62.5

62.6

61.1

61.8

63.7

62.4

61.1

61.1

63.7

Q2FY12

53.6

52.7

49.2

51.8

54.4

54.0

48.5

53.7

56.1

Q3FY12

48.6

47.7

44.5

46.0

50.0

49.1

44.2

47.5

51.7

Q4FY12

52.9

54.7

49.4

46.9

56.3

51.9

48.9

46.9

56.3

Q1FY13

55.0

51.9

48.9

46.9

56.3

56.5

52.8

53.5

59.7

Q2FY13

51.3

47.5

36.3

44.6

53.2

53.2

44.6

49.8

58.4

Q3FY13

49.9

48.6

44.5

45.9

51.7

50.6

47.5

48.1

53.3

Q4FY13

51.3

47.1

44.2

46.3

48.7

53.4

49.1

52.2

55.7

Quarterly Business Confidence Index (BCI)

* The Survey is conducted on a quarterly basis since the 74th Business Outlook Survey

Q2FY14

45.7

46.1

35.1

43.9

51.3

45.4

37.0

43.6

49.5

Q1FY14

51.2

48.7

44.5

46.1

51.7

52.5

49.4

50.6

54.7

Q3FY14

54.9

51.0

41.6

47.7

56.3

56.8

50.1

54.3

60.7

52.9 55.0 51.3 49.9 51.3 51.245.7

54.9

66.2

Q3*

FY11

66.7

Q4

FY11

62.5

Q1

FY12

53.6

Q2

FY12

48.6

Q3

FY12

Q4

FY12

Q1

FY13

Q2

FY13

Q3

FY13

Q4

FY13

Q1

FY14

Q2

FY14

Q3

FY14

Business Confidence Index


6/14

General Economic Prospects

Growth & Inflation

GDP expected to decelerate in the range of 4.5-5.0 per cent in 2013-14, while

WPI inflation to lie above 7 per cent

GDP growth is expected to decelerate to a range of 4.5-5 per cent in 2013-14 by 42 per cent ofthe respondents, while only 28 per cent expect it to lie between 5.0-5.5 per cent. Further, most ofthe respondent firms (41 per cent) expected inflation to lie above 7 per cent for the current fiscal,which is way higher than the comfort level of RBI.

Expected GDP Growth in 2013-14(% of Respondents)

The Twin Deficits - Fiscal & Current Account

53 per cent of respondents expect fiscal deficit to lie in a range of 4.5-5.5 percent of GDP in 2013-14, while 63 per cent expect current account deficit to lie

in a range of 3.5-5.0 per cent of GDP in 2013-14

At a time when subsidies have escalated sharply and the expenses of government have upsiderisk owing to impending Lok Sabha elections in the country, it is comforting to note that the fiscaldeficit in the current year may remain below 5.5 per cent mark, as endorsed by 53 per cent of therespondents. However, the upside risks to fiscal deficit are also high this year given the fact thatweak economic growth would translate into sluggish tax revenue and the ambitiousdisinvestment target would be at risk due to the not-so-favorable market conditions.

3


Expected WPI Inflation in 2013-14(% of Respondents)

6.0 - 6.5%2%

6.5%2%

>7.5%41%

7.0 - 7.5%21%

6.5 - 7.0%19%

6.0 - 6.5%12%


7/14

5.5%13%

3.5 4.0%21%

4.0 4.5%20%4.5 - 5.0%

22%

Even though the current account deficit (CAD) for the second quarter of the current fiscal dippedto 1.2 per cent of GDP, 63 per cent of respondents expect current account deficit to lie in a rangeof 3.5-5.0 per cent of GDP in 2013-14, much above the comfort zone of RBI. In some respite,only 30 per cent believed that CAD may cross 5 per cent mark.

Expected Current Account Deficit in 2013-14(% of Respondents)

Exchange Rate

Rupee to remain in the range of 61-63 per US$ by March 2014

55 per cent of the respondents expect exchange rate to remain in the range of Rs 61-63 per US$by March 2014. Given that US has now announced tapering of its monetary stimulus beginningnext year, this is a positive news. Only 19 per cent feel that exchange rate my cross Rs 63 perUS$ by March 2014.

4

Expected Exchange Rate by March 2014(% of Respondents)


Expected Fiscal Deficit in 2013-14(% of Respondents)

6.0%21%

5.5 6.0%19%

5.0 5.5%21%

4.5 - 5.0%32%

Rs.62-6330%

Rs.61-6225%

Rs.60-6111%

>Rs.6319%

Rs.59-6010%


8/14

>100%2%

50-75%

36%

Below 50%

20%

75-100%

42%

5

General Business Prospects

Capacity Expansion & Capacity Utilization

As compared to 56 per cent respondent firms reporting below 75 per cent

capacity utilization in second quarter, only 45 per cent expect the same forthird quarter

56 per cent of respondents have been running their companies at less than 75 per cent capacityutilization in the second quarter of the current fiscal. In a sign of improvement in the situation,much smaller (only 45 per cent) percentage of respondents expect capacity utilization to fallbelow 75 per cent in the current quarter. Firms, it appears from the survey, are going slow on

adding capacity at the moment. Majority of the respondents (53 per cent) have not planned anincrease in capacity expansion during the current quarter.


Capacity Expansion during July-Sep, 2013(% of Respondents)

Capacity Expansion during Oct-Dec, 2013(% of Respondents)

Change in Spending on Capacity Expansion during Oct-Dec over July-Sep, 2013(% of Respondents)

75-100%

51%

Below 50%

13%

50-75%

32%

>100%4%

Decrease15%

No Change53%

Increase32%


9/14

6


Investment Plans

Majority of respondents expect either no change/decline in their domestic

and international investment plans in 3QFY14

According to the survey, majority of the respondents (54 per cent) expect their domesticinvestments to show either a decline or no change in the Oct-December 2013 quarter. Mirroringthis, nearly of half of the respondents (47 per cent) expect their international investments toeither decline or show no change in the third quarter of 2013-14.

Investment Plans for Oct-Dec, 2013 - Domestic(% of Respondents)

Investment Plans for Oct-Dec, 2013 International(% of Respondents)

Not Applicable

5%>20%

Increase6%

0-10%

Increase

25%

Decline orno change

54%

10-20%

Increase

10%

>20%Increase

4%

NotApplicable

18%

Decline orno change

47%10-20%Increase

11%

0-10%

Increase20%

Overall Trends

Overall Sales & New Orders

A surge in new orders may push sales

The survey reveals that 58 per cent of the respondents expect increase in their sales, neworders and value of production in the third quarter of 2013-14, which is much larger than only 45per cent who witnessed increase in their sales in the previous quarter. This is indeed a healthysign for the economy and bodes well for the growth prospects. It is significant to note that thepercentage of respondents reporting increase in new orders and value of production hasincreased significantly between the second and third quarter, while the same for inventoriesdeclined.


10/14

7


Overall Sales & New orders in July-Sep, 2013(% of Respondents)

Overall Sales & New orders in Oct-Dec, 2013(% of Respondents)

Decrease27%

No Change28%

Increase45%

IncreaseNo Change

Decrease

Increase58%

No Change28%

Decrease14%

Trends in output indicators: Actual (July-Sep) vs. Expected (Oct-Dec), 2013(% of Respondents)

40

55

39

51

3331

40

31

4037

52

45

20.2

14.1

20.9

12.314.9

24.0

New Orders

(July - Sep)

New Orders

(Oct - Dec)

Value of

Production

(July - Sep)

Value of

Production

(Oct - Dec)

Inventories

(July - Sep)

Inventories

(Oct - Dec)

Increase No Change Decrease

Expenditure

Majority expect increase in input cost in third quarter even though thisnumber has fallen from the last quarter

As regards the input cost in the current quarter as compared to the previous quarter, there is asignificant decline in the percentage of respondents who expect expenses on raw materials,electricity, and wages & salaries to increase. However, majority of the respondents expect

increase in other input costs during the current quarter.


11/14


8


Input Costs(% of Respondents)

62

55

66

45 47

38

45 45

35 3732

4851

62

54 55

3.48.2

1.36.5

1.9 0.0 0.7 0.7

Raw Materials

Cost (Actual)

Raw Materials

Cost (Exp)

Electricity

Cost (Actual)

Wages &

Salaries (Exp)

Cost of

credit (Actual)

Cost of

credit (Exp)

Wages &

Salaries (Actual)

Electricity

Cost (Exp)

Pre-tax Profits

Majority expect an increase in profits

Majority of the respondents (43 per cent) expect an increase in their per-tax profit margin in the

third quarter and this marks a sharp increase of 31 per cent in the last quarter. This may beattributed to expectation of a sharp increase in sales and moderation in input costs.

31 32

37

43

32

26


Pre-Tax Profits (Actual) Pre-Tax Profits (Expected)

Pre-tax Profits(% of Respondents)


12/14

Export and Import Trends

Majority expect an increase in export orders and stagnancy in imports

Majority of respondents (53 per cent) expect their exports to increase in the third quarter of thecurrent fiscal. Only 49 per cent of the respondent had seen increase in their exports during theprevious quarter. Exports are likely to find some support amidst economic recovery in both theUS and the Euro Zone. Besides, a weaker Rupee is also likely to aid exports.

The largest 56 per cent of the respondents didnt expect their imports to increase during thecurrent quarter. Only 23 per cent said that they might witness an increase in imports in the thirdquarter. This is positive news as it is expected to keep the current account deficit in check.

9


49

35

15

53

39

8


Actual Expected

Export Volume(% of Respondents)

Import Volume(% of Respondents)

18

57

2423

56

21


Actual Expected


13/14

10

Business Concerns

Domestic economic/political instability, slackening consumer demand,

high level of corruption, persistent inflation and risk from exchange ratevolatility are the top current business concerns

thIn the 85 Business Outlook Survey, domestic economic/political instability, slackeningconsumer demand, high level of corruption, persistent high inflation and risk from exchange ratevolatility emerged as the top five concerns in order of severity to most firms.

Coverage & Methodology

CIIs 85th Business Outlook Survey is based on sample survey of firms covering all industrysectors, including micro, small, medium and large enterprises from different regions. Thesurvey also enumerated responses across industry groups both in public and private sectorsengaged in manufacturing and services sector.

The survey was conducted from October-December 2013, covering 174 firm of varying sizes.

Majority of the respondents (63.2 per cent) belonged to large-scale firms, while 12.1 per centwere from medium-scale firms and 24.7 were from small-scale firms. Sectoral break up showsthat 65 per cent of the respondents were from manufacturing sector while 35 per cent werefrom services sector, respectively.

CII-BCI is calculated as a weighted average of the Current Situation Index (CSI) and theExpectation Index (EI), with greater weight given to EI as compared to CSI. These indices arebased on questions pertaining to performance of the economy and respondents firm.Respondents are asked to rate the current and expected performance on a scale of 0 to 100. Ascore above 50 indicates positive confidence while a score above 75 would indicate strongpositive confidence. On the contrary, a score of less than 50 indicates a weak confidence

index.



14/14

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the

development of India, partnering industry, Government, and civil society, through advisory and

consultative processes.

CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a

proactive role in India's development process. Founded over 118 years ago, India's premier business

association has over 7100 members, from the private as well as public sectors, including SMEs and

MNCs, and an indirect membership of over 90,000 enterprises from around 257 national and regional

sectoral industry bodies.

CII charts change by working closely with Government on policy issues, interfacing with thought

leaders, and enhancing efficiency, competitiveness and business opportunities for industry through a

range of specialized services and strategic global linkages. It also provides a platform for consensus-

building and networking on key issues.

Extending its agenda beyond business, CII assists industry to identify and execute corporate

citizenship programmes. Partnerships with civil society organizations carry forward corporate

initiatives for integrated and inclusive development across diverse domains including affirmative action,

healthcare, education, livelihood, diversity management, skill development, empowerment of women,

and water, to name a few.

The CII Theme for 2013-14 is Accelerating Economic Growth through Innovation,

Transformation, Inclusion and Governance. Towards this, CII advocacy will accord top priority to

stepping up the growth trajectory of the nation, while retaining a strong focus on accountability,

transparency and measurement in the corporate and social eco-system, building a knowledge

economy, and broad-basing development to help deliver the fruits of progress to all.

With 63 offices, including 10 Centres of Excellence, in India, and 7 overseas offices in Australia, China,

Egypt, France, Singapore, UK, and USA, as well as institutional partnerships with 224 counterpartorganizations in 90 countries, CII serves as a reference point for Indian industry and the international

business community.

Confederation of Indian Industry

The Mantosh Sondhi Centre

23, Institutional Area, Lodi Road, New Delhi 110 003 (India)

T: +91 11 45771000 / 24629994-7 | F: +91 11 24626149

E: [email protected] | W: www.cii.in

Reach us via our Membership Helpline: 00-91-11-435 46244 / 00-91-99104 46244CII Helpline Toll free No: 1800-103-1244

85th Business Outlook Survey

Documents

Transcript of 85th Business Outlook Survey