Business confidence-survey-ficci-september-2014

Business Confidence Survey
September 2014

Economic Affairs and Research Division Page 2
Highlights
 Confidence level being restored among industry members - The perception of respondents with regard to current situation relative to past two quarters noted a marked improvement in the latest round of FICCI’s Business Confidence Survey. The proportion of respondents citing ‘moderately to substantially better’ performance vis-a-vis last six months recorded a significant jump at the economy, industry and firm level in the current survey.
Furthermore, participants were optimistic about the near term prospects as well. 93 percent of the companies participating in the survey said that they expect the overall economic situation to be better over the next six months. In the last survey a similar proportion of respondents had indicated likewise.
 Confidence Index highest in fifteen quarters - the Overall Business Confidence Index stood at 72.7 in the present survey round, which is the highest in fifteen quarters. The index value in the last survey was 69.0.
The Current Condition Index increased to 65.4 in the present survey from 57.6 in the previous round. The Expectation Index also indicated a marginal improvement to 76.3 in the current survey round, from 74.6 last time.
 Outlook with regard to operational parameters stable - The results with regard to operational parameters have considerably improved when compared to the situation a year ago. However, relative to the previous survey (when a significant increment was noted in proportion of respondents citing better prospects), this time around the improvement was marginal for most parameters. In the current survey, the outlook with regard to sales and exports looked slightly better vis-a-vis the last survey round.
 Outlook with regard to profits much better compared to the situation a year ago - The proportion of respondents expecting higher profits in near term remained at 43 percent as in the previous survey round. However, this is a significant improvement from just about 17 percent participants stating likewise a year ago.
 Buoyancy gradually returning in investment sentiment - In the present survey, 34 percent of the participants anticipated better investment prospects over the next two quarters. This is a significant improvement when compared to 21 percent stating likewise one year back. The confidence of the investors is gradually returning. The new government has geared in to action and we have seen clearances being given to some big ticket projects. The numbers are definitely set to improve going ahead. The government should continue the work to further smoothen the clearance process.
 Companies intending to maintain hiring at current levels - Not much change was noted in employment outlook of the participating companies; with a majority 64 percent not expecting to hire over the next six months. The corresponding figure in the last survey round was 63 percent. Further, 30 percent of the respondents indicated that they expect to hire more people in near term.
 Majority of the respondents give thumbs up to cabinet’s decision to amend labour laws - The respondents were asked their opinion about the cabinets’ recent approval to the proposal to amend the three archaic labour laws – Apprenticeship Act, Factories Act and the Labour Act of 1988. A majority of the companies participating in the survey felt that the change in laws has been long pending and that the laws should be made industry friendly and transparent. The participating companies felt due cognizance should be given to the welfare of employees as well as employers.

 India’s potential to be a global manufacturing hub - the ‘Make in India’ vision of the Hon’ble Prime Minister sends out a clear message about India’s manufacturing potential. However, we need to work in consonance with our competitive edge, identifying products we can specialise in. Given that, we asked the participants to indicate what are the ‘focus’ products where India can create a niche for itself given its physical and human resource endowments. According to companies participating in the survey, following sectors were identified as the ‘focus’ sectors for India where all efforts should be made to ramp up domestic capacities.
In fact, these sectors closely map with the ones indicated by the government during the recent launch of ‘Make in India’ campaign.
 Demand situation on the road to recovery - Weak demand has been a concern persistently for over a year now and this has come out evidently in the survey results with about 70 percent respondents citing it as a problem area. However, the results of the present survey indicate that there has been some improvement in the demand situation. In the current survey round though more than half of the respondents (57 percent) said that weak demand is a constraining factor, this was lower than 74 percent stating likewise in the previous survey.
 With regard to the credit situation, the participants seemed pretty comfortable especially with regard to availability of credit. Almost 77 percent companies participating in the survey felt that availability of credit was not a problem. The corresponding figure was 75 percent in the last survey and 62 percent a year ago. Still 45 percent of respondents cited cost of credit to be a problem area; however this is significantly lower than 72 percent stating likewise a year back.
Engineering: Heavy and Light
Electrical and Electronic products
Automobiles and Auto Components
Textiles
Steel and Iron
Pharmaceuticals/Medical equipment
Food processing and Agro based industries
Defence Equipment

Survey Profile
The current survey drew responses from companies with a wide sectoral and geographical spread. The survey drew responses from about 150 companies with a turnover ranging from Rs 30 crore to Rs 41, 000 crore. The participating companies belonged to a wide array of sectors such as textiles, cement, pharmaceutical, chemicals, steel and steel products, construction, food processing, electrical equipment and machinery, paper and paper products, financial services. The survey was conducted during the months of July and August 2014.
Detailed Survey Findings
Respondents cite an improvement in the current conditions vis-a-vis last six months
Net Responses*:
Current performance vis-à-vis the performance in last six months
* Net responses are measured as the differential between the companies reporting positive and negative responses. Responses indicating status quo are not reckoned
The latest round of FICCI’s Business Confidence Survey noted a marked improvement in the perception of the respondents with regard to current conditions vis-à-vis last six months.
A majority 82 percent of the participants in the present survey said that the current economic situation is ‘moderately to substantially better’ vis-à-vis last six months. In the last survey, 48 percent respondents had reported likewise. Only 2 percent of the companies participating in the survey felt that there has been a deterioration in the current economic situation when compared to the previous two quarters.
At industry level, 56 percent of the respondents reported that the current industry performance is better relative to the situation six months back. This was 22 percentage points higher than the proportion of respondents stating likewise in the previous survey.
-80
-60
-40
-20
0
20
40
60
80
100
Q1 2012-13
Q2 2012-13
Q3 2012-13
Q4 2012-13
Q1 2013-14
Q2 2013-14
Q3 2013-14
Q4 2013-14
Q1 2014-15
Economy
Industry
Firm

In the previous survey, no change was reported in the percentage of respondents (which stayed at 41 percent) citing an improvement in the firm level performance vis-à-vis last six months. In the current survey, 60 percent of the participants reported likewise. Further, only 7 percent participants said that the current firm level situation is ‘moderately to substantially worse’ vis-à-vis last six months.
Optimism with regard to future prospects maintained in the current survey
Net Responses*:
Expected performance over next six months
* Net responses are measured as the differential between the companies reporting positive and negative responses. Responses indicating status quo are not reckoned
The previous survey had noted a remarkable improvement in the outlook of the participants. The results of the present survey indicate a continuation of this sanguinity. Once again a whopping 93 percent of the respondents said that overall economic situation is expected to be ‘moderately to substantially better’ over the next two quarters. The remaining 7 percent participating companies indicated no change in the state of affairs over the coming six months.
The action oriented approach of government is supporting the optimism amongst participants. In the first 100 days, government has taken a series of measures geared towards taking the economy to a higher growth trajectory. However, timely implementation of announcements will be critical to sustain this recovery.
According to current survey results, at industry level, 89 percent of the respondents indicated better prospects over next six months. This was a marginal increase from 82 percent stating likewise in the last survey. Around 9 percent companies participating in the survey said they expect no change in industry level performance over the next two quarters. This improvement at the industry level is reflected in actual data as well. However, there is still some underlying volatility and the trend needs to be closely followed.
Further, 81 percent of the participating companies were confident about firm level performance in the coming six months. The corresponding figure was 75 percent in the last survey. While 16 percent of the participants reported that they anticipate no change in the firm level situation over the next two quarters, the remaining 2 percent expected deterioration in performance.
-20
0
20
40
60
80
100
120
Q1 2012-13
Q2 2012-13
Q3 2012-13
Q4 2012-13
Q1 2013-14
Q2 2013-14
Q3 2013-14
Q4 2013-14
Q1 2014-15
Economy
Industry
Firm

Outlook with regard to operational parameters stable
The results with regard to operational parameters have certainly improved when compared to the situation a year back. However, relative to the previous survey only a marginal improvement was noted. In the current survey, the outlook with regard to sales and exports looked slightly better vis-a-vis the previous survey.
Operational Parameters:
Proportion of respondents anticipating better prospects over next six months
The participating companies seemed upbeat about the sales prospects in near term. About three quarter of the respondents indicated that sales are expected to be ‘much higher to higher’ over the next six months. This improvement to some extent can be attributed to the onset of festive season. The corresponding figure in the previous survey was 67 percent. And a year back 39 percent respondents had stated likewise. Further, in the present survey, only 2 percent of respondents anticipated lower sales over the next two quarters.
The outlook with regard to profits has noted a significant improvement over the past one year. In the present survey 43 percent of the respondents anticipated ‘much higher to higher’ profits in the coming six months. A year back, 17 percent of the companies had reported likewise. Further, 41 percent of the companies in the current survey expected no change in profit levels over the coming two quarters.
The confidence of the investors is getting restored steadily and there has definitely been an improvement over the past year. In the present survey, 34 percent of the participants cited better investment prospects over the next two quarters. This was 13 percentage points higher than the proportion of respondents stating likewise a year back. Further, 54 percent of respondents said that they foresee no change in investments over the next six months.
30
34
43
48
75
0
10
20
30
40
50
60
70
80
Employment
Investments
Profits
Exports
Sales

Prospects for next six months (All figures are in % and refer to proportion of respondents)
Not much change was noted in employment outlook of the participating companies; with a majority 64 percent not expecting to hire over the next six months. The corresponding figure in the last survey was 63 percent. Further, in the current survey, 30 percent of the respondents said that they expect to hire more people in near term.
On the outlook with regard to exports, 48 percent participants expected exports to increase over the next two quarters, marginally up from 46 percent stating likewise in the previous round. About 39 percent companies expected exports to remain at current levels in near term.
Overall Business Confidence Survey index highest in fifteen quarters
With an improvement in the current situation as well as in expectations, the Overall Business Confidence Index noted an increase for the fourth consecutive quarter. In the current survey, the Overall Business Confidence Index stood at 72.7 -highest in fifteen quarters. In the previous round the value stood at 69.0.
The Current Condition Index increased to 65.4 in the present survey round from 57.8 in the previous round. The Expectation Index also indicated a marginal improvement to 76.3 in the current survey round, from 74.6 last time.
0
10
20
30
40
50
60
70
80
90
FICCI BCS Q1 (2002-03)
Overall Business Confidence Index
Overall business confidence index
Current conditions index
Expectations index
Prospects for the
next six months
Decline
Increase
0%-5%
Increase
5%-10%
Increase
10%-20%
Increase
20%-30%
Increase
>30% Sales 4 21 28 33 7 7
Profits
16
39
19
20
5
1 Investments 12 51 20 8 6 3

Key constraining factors for businesses
Weak demand has been a concern persistently for over a year now and this has come out evidently in the past survey results with at least about 70 percent respondents citing it as a problem area. However, the results of the latest survey indicate some improvement in the demand situation. In the current survey though more than half of the respondents (57 percent) said that weak demand is a constraining factor, this was lower than 74 percent participants stating likewise in the previous survey. It seems demand is slowly picking up and there has been some turn around in the consumer sentiment.
Expected order book position next six months
In fact, this was further affirmed by the outlook of the respondents with regard to the order book position. About 80 percent respondents cited that they foresee a better order book position over the next two quarters. This was 8 percentage points higher than the proportion of people stating likewise in the previous survey. Moreover, none of the respondents expected a worsening in the order book position.
With regard to the credit situation, the participants seemed pretty comfortable especially with regard to the availability of credit. Almost 77 percent companies participating in the survey felt that availability of credit was not a problem. In the last survey the corresponding figure was 75 percent and a year back 62 percent.
Still 45 percent sighted cost of credit to be a problem area; however this is significantly lower than 72 percent stating likewise a year back.
80
20
0
72
22
6
0
10
20
30
40
50
60
70
80
90
Better
Same
Worse
Present Survey
Last Survey

Average interest rate charged by the banks on working capital and term loan
Working Capital Loan
Term Loan
At present
Six months
back
One year
Back
At present
Six months
Back
One year
back
Turnover
up to 500 crore
12.5
12.8
12.9
12.2
12.6
12.9
Turnover over 500 crore
12.0
12.2
12.3
11.4
11.5
11.6
Over the past one year, a sharp drop has been noted in the proportion of respondents indicating raw material prices to be a constraining factor. From 65 percent last year, the proportion has come down to 45 percent in the present survey.

Annexure - Survey at a Glance
FICCI BCS Q1 2013-14 FICCIBCS Q2 2013-14 FICCIBCS Q3 2013-14 FICCI BCS Q4 2013-14 FICCI BCS Q1 2014-15
1a Current overall economic conditions vis-à-vis the last six months
Moderately to Substantially better
14
32
25
48
82
Same / No change
21
42
52
39
16
Moderately to Substantially worse
65
26
24
13
2
1b Expectations for overall economic conditions for the next six months
21
46
50
93
93
Same / No change
50
44
34
5
7
29
11
16
2
0
2a Current industry performance vis-à-vis the last six months
21
24
23
34
56
Same / No change
29
46
52
47
34
50
30
25
20
10
2b Expectations for industry performance in the next six months
26
53
54
82
89
Same / No change
42
37
30
14
9
32
10
16
4
2
3a Current firm level performance vis-à-vis the last six months

27
36
41
41
60
Same / No change
44
44
38
50
33
29
20
21
9
7
3b Expectations regarding firm level performance in the next six months
42
63
63
75
81
Same / No change
43
29
32
21
16
15
9
6
4
2
4 Confidence Indices
Current Conditions Index
43.6
52.0
52.9
57.8
65.4
Expectations Index
51.7
63.0
64.8
74.6
76.3
Overall Business Confidence Index
49.0
59.3
60.8
69.0
72.7
5 Problem areas
Weak Demand
Yes
70
70
70
74
57
No
30
30
30
26
43
Threat of imports
Yes
35
25
21
28
28
No
65
75
79
72
72
Constrained availability of credit
Yes
38
31
40
25
23
No
62
69
60
75
77
High cost of credit
Yes
72
64
53
47
45
No
28
36
47
53
55
Rising raw material prices
Yes
69
67
65
37
45
No
31
33
35
63
55
6 Present capacity utilization
Less than 25%
8
9
4
2
0
Between 25% and 50%
12
15
15
9
12
Between 50% and 75%
39
33
38
36
34
More than 75%
41
43
42
53
54
7 Prospects for the next six months

Investments
Much higher
2
8
4
8
2
Higher
19
37
20
32
32
Same / No change
51
38
56
54
54
Lower
29
17
20
6
12
Sales
Much higher
2
4
8
5
11
Higher
37
53
48
62
64
Same / No change
53
33
37
27
23
Lower
8
11
8
5
2
Selling price
Much higher
0
0
0
2
0
Higher
11
21
25
16
10
Same / No change
67
67
61
75
81
Lower
21
12
14
8
10
Profit
Much higher
0
0
0
6
2
Higher
17
26
29
37
41
Same / No change
43
43
45
48
41
Lower
40
30
25
9
16
Exports
Much higher
4
2
3
5
3
Higher
19
43
39
41
45
Same / No change
56
41
47
43
39
Lower
22
13
11
11
12
Employment
Much higher
0
2
2
2
0
Higher
12
26
18
27
30
Same / No change
67
57
67
63
64
Lower
22
15
14
8
7

Business confidence-survey-ficci-september-2014

Recommended

Recommended

More Related Content

What's hot

What's hot (7)

Viewers also liked

Viewers also liked (6)

Similar to Business confidence-survey-ficci-september-2014

Similar to Business confidence-survey-ficci-september-2014 (20)

More from Federation of Indian Chambers of Commerce & Industry (FICCI)

More from Federation of Indian Chambers of Commerce & Industry (FICCI) (20)

Recently uploaded

Recently uploaded (20)

Business confidence-survey-ficci-september-2014