The document summarizes key findings from the 87th Business Outlook Survey conducted by the Confederation of Indian Industry:
1) The CII Business Confidence Index increased sharply to 53.7 for the next quarter, indicating improved investor sentiment.
2) GDP growth is expected to be in the range of 5.0-5.5% for 2014-15, while WPI inflation is expected to moderate to 5.5-6.5%.
3) The fiscal deficit is expected to be 4.5-5.0% of GDP and the current account deficit is projected to be 2.5-3.0% of GDP for 2014-15.
The document summarizes key findings from the 87th Business Outlook Survey conducted by the Confederation of Indian Industry:
1) The CII Business Confidence Index increased sharply to 53.7 for the next quarter, indicating improved investor sentiment.
2) GDP growth is expected to be in the range of 5.0-5.5% for 2014-15, while WPI inflation is expected to moderate to 5.5-6.5%.
3) The fiscal deficit is expected to be 4.5-5.0% of GDP and the current account deficit is projected to be 2.5-3.0% of GDP for 2014-15.
The document summarizes key findings from the 87th Business Outlook Survey conducted by the Confederation of Indian Industry:
1) The CII Business Confidence Index increased sharply to 53.7 for the next quarter, indicating improved investor sentiment.
2) GDP growth is expected to be in the range of 5.0-5.5% for 2014-15, while WPI inflation is expected to moderate to 5.5-6.5%.
3) The fiscal deficit is expected to be 4.5-5.0% of GDP and the current account deficit is projected to be 2.5-3.0% of GDP for 2014-15.
The document summarizes key findings from the 87th Business Outlook Survey conducted by the Confederation of Indian Industry:
1) The CII Business Confidence Index increased sharply to 53.7 for the next quarter, indicating improved investor sentiment.
2) GDP growth is expected to be in the range of 5.0-5.5% for 2014-15, while WPI inflation is expected to moderate to 5.5-6.5%.
3) The fiscal deficit is expected to be 4.5-5.0% of GDP and the current account deficit is projected to be 2.5-3.0% of GDP for 2014-15.
HIGHLIGHTS Indicating sharp improvement in investors sentiments, the CII Business Confidence Index (CII- BCI) for April- June 2014 quarter increased sharply to 53.7 from 49.9 in the previous quarter.
GDP is expected to pick up to a range of 5.0-5.5 per cent in 2014-15 from 4.7 per cent in the last fiscal, while WPI inflation expected to moderate in the range to 5.5-6.5 per cent in the current fiscal.
Fiscal Deficit is expected to lie in the range 4.5- 5.0 per cent of GDP in 2014-15.
Current Account Deficit is expected in the range of 2.5-3.0 per cent of GDP in the current fiscal.
Exchange rate is expected to be prevail at an average of around Rs 60 per US dollar in 2014- 15
Capacity utilization is expected to improve in 1QFY15 as compared to the previous quarter. An improvement in capacity utilization could mean the beginning of improvement in the overall demand conditions for the firms.
Majority of respondents expect increase in investment plans in 1QFY15.
Majority of the respondents expect increase in profit before tax led by increase in new order / sales and moderation in expenditure.
Majority of the respondents expect increase in exports and imports.
Domestic economic instability emerged as the top business concern.
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87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry
BUSINESS CONFIDENCE INDEX
Indicating sharp improvement in investors sentiments, the CII Business Confidence Index (CII- BCI) for April- June 2014 quarter increased sharply to 53.7 from 49.9 in the previous quarter. Improvement in the index can be primarily attributed to the recent positive developments on economic and political scenario of the country. On the economic front, the positive developments include recovery in export growth, improvement in twin deficits, buoyant foreign capital inflows, strengthening rupee and moderating inflation. On political front, formation of a new government at the Center with decisive majority has boosted the confidence of market and investors. The pick-up in BCI for the current quarter comes as a silver lining for the economy. However, it should also be approached with a bit of cautious optimism as the downside risks to growth have still not abated from the horizon. Moreover, plenty would depend on the new government announcements of necessary policy measures in order to aid the growth pick-up. 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 previous and current quarter. The CII-BCI is then constructed as a weighted average of the Current Situations Index (CSI) and the Expectation Index (EI).
Quarterly Business Confidence Index (BCI) Index Q 1
F Y 1 2
Q 2
F Y 1 2
Q 3
F Y 1 2
Q 4
F Y 1 2
Q 1
F Y 1 3
Q 2
F Y 1 3
Q 3
F Y 1 3
Q 4
F Y 1 3
Q 1
F Y 1 4
Q 2
F Y 1 4
Q 3
F Y 1 4
Q 4
F Y 1 4
Q 1
F Y 1 5
Business Confidence Index 62.5 53.6 48.6 52.9 55.0 51.3 49.9 51.3 51.2 45.7 54.9 49.9 53.7 Current Situation Index 62.6 52.7 47.7 54.7 51.9 47.5 48.6 47.1 48.7 46.1 51.0 47.3 50.1 Overall Economy 61.1 49.2 44.5 49.4 48.9 36.3 44.5 44.2 44.5 35.1 41.6 40.4 46.8 Own Activity Sector 61.8 51.8 46.0 46.9 46.9 44.6 45.9 46.3 46.1 43.9 47.7 44.0 46.8 Own Company 63.7 54.4 50.0 56.3 56.3 53.2 51.7 48.7 51.7 51.3 56.3 51.9 53.4 Expectation Index 62.4 54.0 49.1 51.9 56.5 53.2 50.6 53.4 52.5 45.4 56.8 51.2 55.5 Overall Economy 61.1 48.5 44.2 48.9 52.8 44.6 47.5 49.1 49.4 37.0 50.1 46.1 52.0 Own Activity Sector 61.1 53.7 47.5 46.9 53.5 49.8 48.1 52.2 50.6 43.6 54.3 49.1 54.6 Own Company 63.7 56.1 51.7 56.3 59.7 58.4 53.3 55.7 54.7 49.5 60.7 54.3 57.3 * The Survey is conducted on a quarterly basis since the 74th Business Outlook Survey
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87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry
GENERAL ECONOMI C PROSPECTS GROWTH & I NFLATI ON
GDP is expected to pick up marginally in the range of 5.0-5.5 per cent in 2014-15. WPI inflation is expected to moderate in the range to 5.5-6.5 per cent in the current fiscal. Most (46 per cent) of the respondents expect GDP growth to settle in the range of 5.0-5.5 per cent in 2013-14, while only 16 per cent expect it to lie between 5.5-6.0 per cent. For the growth to cross 5.5 per cent mark in the current year, reforms will have to surpass the current level of expectations. Further, majority of the respondent firms (53 per cent) expect inflation to lie in the range of 5.5- 6.5 per cent for the current fiscal. This would be in continuation of the moderation seen in inflation from 7.4 per cent in 2012-13 to 6.0 per cent in 2013-14. However, we need to maintain a cautious approach with regard to inflationary expectations given the upward risks to inflation from enhanced possibility of an El Nio, disrupting the monsoon in 2014. Though on the flip side, inflation may be capped as the lagged impact of previous rate hikes seeps through and a strong base effect from last year lowers headline inflation.
THE TWI N DEFI CI TS - FI SCAL & CURRENT ACCOUNT
Largest 44 per cent of the respondents expect fiscal deficit to lie in the range 4.5- 5.0 per cent of GDP in 2014-15. Similarly, 32 per cent of the respondents expect current account deficit (CAD) in the range of 2.5-3.0 per cent of GDP for the year. <4.5% 8% 4.5 - 5.0% 18% 5.0 - 5.5% 46% 5.5 - 6.0% 16% 6.0-6.5% 10% Above 6.5% 2% Expected Economic Growth in 2014-15 (% of Respondents) <5.0% 7% 5.0 - 5.5% 15% 5.5 6.0% 33% 6.0 - 6.5% 21% 6.5 7.0% 15% Above 7.0% 9% Expected Average WPI Inflation for 2014-15 (% of Respondents) 3
87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry In the 87 th CII-BOS survey, the largest 44 per cent of the respondents expect fiscal deficit to lie in the range 4.5- 5.0 per cent of GDP in 2014-15. Given that the fiscal deficit for previous year stood at 4.5 per cent of GDP, this indicates limited expectation of rationalization in thel deficit in the current year. In order to effect a significant reduction in fiscal deficit, the new government would need to undertake numerous measures in the form of fast tracking implementation of GST, implementing PSU disinvestment and addressing the subsidy situation, amongst other measures. Similarly, 32 per cent of the respondents expect current account deficit in the range of 2.5-3.0 per cent of GDP in 2014-15. It is pertinent to note that Indias current account deficit narrowed sharply to 1.7 per cent of GDP in 2013-14 from 4.7 per cent of GDP in 2012-13. The CAD in the current year may move up in the backdrop of faster increase in imports as the economic activities pick up.
EXCHANGE RATE
Encouraged by recent recovery in Rupee, 47 per cent of the respondents expect exchange rate to prevail in the range of Rs 59-61 per US dollar in 2014-15. The Rupee, after having witnessed sharp fluctuation in its value against USD in the previous fiscal, is expected to remain stable in the current year in the rage of Rs 59-61 per USD.
<4.5% 26% 4.5 - 5.0% 44% 5.0 5.5 % 25% 5.5 6.0% 4% Above 6.0% 1% Expected Fiscal Deficit in 2014-15 (% of Respondents) <2.5% 12% 2.5-3.0% 32% 3.0-3.5% 25% 3.5-4.0% 16% 4.0-4.5% 9% >4.5% 6% Expected Current Account Deficit in 2014-15 (% of Respondents) 4
87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry
GENERAL BUSI NESS PROSPECTS CAPACI TY UTI LI ZATI ON
Capacity utilization is expected to improve in 1QFY15 as compared to the previous quarter In an indication of improvement in business sentiments, 44 per cent of the respondent firms expect the capacity utilization levels to be more than 75 per cent in Q1FY15, up from 34 per cent respondents in the previous quarter. An improvement in capacity utilization could mean the beginning of improvement in the overall demand conditions for the firms.
Note: AL is Actual level, EL is Expected Level <Rs 59 29% Rs 59-60 23% Rs 60-61 24% Rs 61-62 11% Rs 62-63 5% >Rs 63 8% Expected Exchange Rate in 2014-15 (% of Respondents) 20.0 12.4 46.0 43.3 32.0 40.2 2.0 4.1 Jan-Mar 2013-14 (AL) Apr-Jun 2014-15 (EL) Jan-Mar 2013-14 (AL) Apr-Jun 2014-15 (EL) Jan-Mar 2013-14 (AL) Apr-Jun 2014-15 (EL) Jan-Mar 2013-14 (AL) Apr-Jun 2014-15 (EL) Below 50% 50-75% 75-100% > 100% Capacity Utilization (% of Respondents) 5
87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry I NVESTMENT PLANS
Majority of respondents expect increase in investment plans in 1QFY15 Majority of the respondents (59 per cent) expect their domestic investments to increase in April-June 2014 quarter. Mirroring this, the largest 43 per cent of respondents expect their international investments to increase during the same time period.
OVERALL TRENDS OVERALL SALES & NEW ORDERS
A surge in new orders may push sales
Improvement in sales and new orders is expected during April-June 2014. 56 per cent of the respondents expect increase in their sales in the first quarter of 2014-15, much higher than 37 per cent respondents witnessing increase in their sales in the previous quarter. Similarly, increase in new orders in the current quarter was expected by 56 per cent of respondents, much higher than 34 per cent in the earlier quarter. 37.9 29.1 18.4 11.7 2.9 34.7 26.5 10.2 6.1 22.4 D e c l i n e
o r
n o
c h a n g e I n c r e a s e
b y
0 - 1 0 % I n c r e a s e
b y
1 0 - 2 0 % I n c r e a s e
b y
> 2 0 % N o t
A p p l i c a b l e D e c l i n e
o r
n o
c h a n g e I n c r e a s e
b y
0 - 1 0 % I n c r e a s e
b y
1 0 - 2 0 % I n c r e a s e
b y
> 2 0 % N o t
A p p l i c a b l e Domestic Investments International Investments Investment Plans for Apr-Jun 2014 (% of Respondents) 6
87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry
EXPENDI TURE Input costs, in general, are expected to decline or remain same in April-June 2014 quarter
Expectations regarding raw material cost in 1QFY15 are largely similar to the same in previous quarter. In case of electricity & fuel cost and cost of credit, however, majority of the respondents expect it to either remain same or decline in Apr-Jun 2014 quarter as compared to the previous quarter. Only wages and salaries indicate an upward pressure in the Apr-Jun 2014 quarter as the percentage of respondent expecting an increase in wages and salaries has increased to 68 per cent from 56 per cent in the previous quarter.
37 45 18 34 48 13 57 29 15 56 31 9 Increase No Change Decline Increase No Change Decline Sales Count of New Orders Actual (Jan-Mar 2014) Expected (Apr-Jun 2014) 46.2 47.9 49.5 43.3 55.7 68.0 36.1 24.5 47.3 46.8 50.5 55.7 44.3 32.0 61.9 66.3 6.5 5.3 0.0 1.0 0.0 0.0 2.1 9.2 J a n - M a r
2 0 1 4
( A c t u a l ) A p r - J u n
2 0 1 4
( E x p e c t e d ) J a n - M a r
2 0 1 4
( A c t u a l ) A p r - J u n
2 0 1 4
( E x p e c t e d ) J a n - M a r
2 0 1 4
( A c t u a l ) A p r - J u n
2 0 1 4
( E x p e c t e d ) J a n - M a r
2 0 1 4
( A c t u a l ) A p r - J u n
2 0 1 4
( E x p e c t e d ) Total Raw Material Cost Electricity and Fuel Cost Wages and Salaries Cost of Credit Increase No Change Decline Overall Sales & New orders (% of Respondents) Input Costs for 4QFY14 (% of Respondents) 7
87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry PRE-TAX PROFI TS Rise in percentage of respondents expecting an increase in profits
Expectation of recovery in new orders and sales coupled with moderation in expenditure has led to rise in percentage of respondents expecting an increase in profits in Apr-Jun 2014 quarter. Around 34 per cent expect increase in their per-tax profits in the Apr-Jun 2014 quarter, higher than 21 per cent in the previous quarter.
EXPORT AND I MPORT TRENDS Rise in percentage of respondents expecting increase in exports and imports
37 per cent of the respondents expect their export orders to increase in Apr-Jun 2014 quarter, much higher than 23 per cent who had seen the increase in their export orders during the previous quarter. Correspondingly, percentage of respondents expecting their exports to increase has also gone up from 27 per cent in Jan-Mar 2014 quarter to 43 per cent in Apr-Jun quarter.
20.8 47.9 31.3 34.0 47.4 18.6 Increase No Change Decline Jan-Mar 2014 (Actual) Apr-Jun 2014 (Expected) 26.9 57.7 15.4 22.7 68.0 9.3 43.4 50.0 6.6 36.5 56.8 6.8 Increase No Change Decline Increase No Change Decline Exports New Orders Actual (Jan-Mar 2014) Expected (Apr-Jun 2014) Exports (% of Respondents) Pre-tax profits (% of Respondents) 8
87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry
In line with expectation of pick up in production and sales, there is a rise in percentage of respondents expecting imports to increase to 24 per cent in Apr-Jun 2014 quarter as compared to 14 per cent who had expected an increase in imports in the previous quarter.
BUSI NESS CONCERNS
Domestic economic/political instability emerged as the top business concerns
In the 87 th Business Outlook Survey, domestic economic instability emerged as the top most concerns, followed by moderation in growth.
14.3 70.1 15.6 24.0 64.0 12.0 Increase No Change Decline Actual (Jan-Mar 2014) Expected (Apr-Jun 2014) 40 44 51 55 65 Rising borrowing costs Slow pick up in global growth High inflation Moderation in growth Domestic Economic/Political uncertainty Import Volume (% of Respondents) Major Concerns (% of Respondents) 9
87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry COVERAGE & METHODOLOGY
CIIs 87 th Business Outlook Survey is based on sample survey of firms covering all industry sectors, including micro, small, medium and large enterprises from different regions. The survey also enumerated responses across industry groups both in public and private sectors engaged in manufacturing and services sector. The survey was conducted from April- June 2014, covering more than 150 firm of varying sizes. Majority of the respondents (49.5 per cent) belonged to large-scale firms, while 12.6 per cent were from medium-scale firms and 31.1 per cent and 6.8 per cent each were from small-scale and micro firms, respectively. Sectoral break up shows that 54.4 per cent of the respondents were from manufacturing sector while 44.7 per cent were from services sector, respectively. CII-BCI is calculated as a weighted average of the Current Situation Index (CSI) and the Expectation Index (EI), with greater weight given to EI as compared to CSI. These indices are based 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. A score above 50 indicates positive confidence while a score above 75 would indicate strong positive confidence. On the contrary, a score of less than 50 indicates a weak confidence index.
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87TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry Reach us via our Membership Helpline: 00-91-11-435046244/ 00-91-99104 46244 CII Helpline Toll free No: 1800-103-1244
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 in 1895, India's premier business association has over 7200 members, from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 100,000 enterprises from around 242 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 of Accelerating Growth, Creating Employment for 2014-15 aims to strengthen a growth process that meets the aspirations of todays India. During the year, CII will specially focus on economic growth, education, skill development, manufacturing, investments, ease of doing business, export competitiveness, legal and regulatory architecture, labour law reforms and entrepreneurship as growth enablers. With 64 offices, including 9 Centres of Excellence, in India, and 7 overseas offices in Australia, China, Egypt, France, Singapore, UK, and USA, as well as institutional partnerships with 312 counterpart organizations in 106 countries, CII serves as a reference point for Indian industry and the international business community.
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