CII Business Outlook Survey

2016
95th Business Outlook Survey
June

95TH BUSINESS OUTLOOK SURVEY
Confederation of Indian Industry
(April-June 2016)
HIGHLIGHTS
The CII Business Confidence Index (CII- BCI) for April-June 2016 quarter rose to 57.2 from 54.1
in the previous quarter.
Majority of the respondents expect the economy to grow between 7.0-8.0%.
More than three quarter of the respondents (78 per cent) expect inflation to lie in the 4.0-
6.0% range.
Nearly two thirds of the respondents (64 per cent) expect another cut in policy rates by the
central bank.
Majority of the respondents (43 per cent) attribute the recovery in corporate sector to
increased government spending.
Major share of the respondents (40 per cent) feel that a turnaround in the global economy
will help jumpstart private investment cycle.
Close to half of the respondents (47 per cent) expect capacity utilization to improve to 75-
100% level in Apr-Jun 2016 quarter.
Majority of the firms expect no change in their domestic and international investment plans
in Apr-Jun 2016.
Close to two thirds of the respondents expect an improvement in sales and new orders in the
Apr-Jun 2016 quarter.
While an almost equal share of respondents expect the cost of raw materials and fuels to
either increase or remain unchanged in Apr-Jun 2016, a significant majority anticipates an
increase in wages and salaries and unchanged credit cost in the said quarter.
Close to 50 per cent of the respondents anticipate an increase in after tax profits in Apr-Jun
2016.
Majority of the respondents expect no significant change in external trade in Q1 FY17.
Low domestic demand and fragile global economic recovery emerge as the top concerns this
quarter.
1

BUSINESS CONFIDENCE INDEX
The CII Business Confidence Index (CII- BCI) for April-June 2016 quarter rose to 57.2 as against the
level of 54.1 recorded in the previous quarter. The BCI has been on an uptrend since the last two
quarters owing to an improvement in both the Current Situation Index and the Expectation Index.
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 was
then constructed as a weighted average of the Current Situations Index (CSI) and the Expectation
Index (EI).
A comparison of the CSI and EI indicated a sharper improvement in the EI in April-June 2016 quarter
mainly owing to a stronger improvement in sentiment across all categories - economy, sector and
company.
QuarterlyBusinessConfidenceIndex(BCI)
Index
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Business Confidence Index 51.2 45.7 54.9 49.9 53.7 57.4 56.2 56.4 54.4 53.4 53.9 54.1 57.2
Current Situation Index 48.7 46.1 51 47.3 50.1 51.4 53.5 53.5 52.2 49.3 50.7 50.7 52.3
Overall Economy 44.5 35.1 41.6 40.4 46.8 51.2 55 54.3 54.8 48.6 50.2 52.0 54.9
Own Activity Sector 46.1 43.9 47.7 44 46.8 49.2 49.4 52.7 48.3 45.4 48.8 47.6 48.1
Own Company 51.7 51.3 56.3 51.9 53.4 52.9 55.8 53.8 54.0 52.1 52.2 52.3 54.2
Expectation Index 52.5 45.4 56.8 51.2 55.5 60.5 57.6 57.8 55.4 55.5 55.5 55.9 59.7
Overall Economy 49.4 37 50.1 46.1 52 59.9 59.2 58.1 57.9 54.0 56.2 57.5 60.6
Own Activity Sector 50.6 43.6 54.3 49.1 54.6 59.1 54.5 57.5 51.8 53.3 55.0 52.2 58.0
Own Company 54.7 49.5 60.7 54.3 57.3 61.6 59.1 57.9 57.1 57.5 55.5 57.8 60.4
* The Survey is conducted on a quarterly basis since the 74th Business Outlook Survey
GENERAL ECONOMIC PROSPECTS
GDP GROWTH
Majority of the respondents expect the economy to grow between 7.0-8.0%.
A significant proportion of the respondents (61 per cent) expect the domestic economy to record 7.0-
8.0% growth in 2016-17, of which a major share (36 per cent) expect GDP growth to lie above 7.5%
while 25 per cent feel that the economy may slow down from the previous financial year and grow
between 7.0-7.5%.
2

<4%
5%
4.0-5.0%
39%
5.0-6.0%
39%
6.0-7.0%
14%
>7.0
3%
Expected CPI Inflation in 2016-17
(% of Respondents)
INFLATION
More than three quarter of the respondents (78 per cent) expect inflation to lie in the 4.0-6.0% range.
Despite the recent uptick in inflationary pressures, a significant share of the respondents (78 per cent)
expect the CPI inflation to hover around 5% in 2016-17, in line with the RBI’s expectation for the
financial year. So far this year, price pressures have been on the rise due to increasing food and fuel
costs and in expectation of the salary and wage increase of central government employees under the 7th
Pay Commission. However, a normal monsoon may provide some relief from food inflation in the latter
half of the year.
3
<5.5%
1% 5.5 - 6.0 %
7%
6.0 - 6.5%
11%
6.5 - 7.0%
14%
7.0 - 7.5%
25%
7.5-8.0%
36%
>8.0
6%
Expected GDP Growth Rate in 2016-17
(% of Respondents)

POLICY RATES
Nearly two thirds of the respondents (64 per cent) expect another cut in policy rate by the central
bank.
Majority of the respondents (64 per cent) are optimistic about a cut in interest rate by the RBI in order
to support the domestic economy while the global environment continues to remain challenging. The
remaining 36 per cent of the respondents feel that the central bank will adopt a cautious approach and
may not engage in any further rate cuts in 2016-17.
CORPORATE RECOVERY
Large proportion of the respondents (43 per cent) attribute the recovery in corporate sector to
increased government spending.
A major share of the respondents (43 per cent) feel that the turnaround in corporate sector earnings in
Q4 FY 2015-16 was mainly owing to the increased government spending. Closely enough 41 per cent of
the respondents attribute this recovery to increased consumption demand (private consumption
expenditure).
4
Rate cut
likely in FY
2016-17
64%
No more
rate cuts this
fiscal
36%
Expectation of a cut in Policy rates by RBI
(% of Respondents)

PRIVATE INVESTMENT CYCLE
Major share of the respondents (40 per cent) feel that a turnaround in the global economy will help
jumpstart private investment cycle.
Despite the various attempts by the government, the investment cycle is yet to recover and had slowed
down further in 2015-16. Private sector investment continues to crawl and stalled projects remain high
in Q1 FY 2016-17, as companies continue to postpone new investments on global economic uncertainty,
unforthcoming demand, lack of regulatory clearances and inadequate supply of inputs. In this context, a
majority of the respondents (40 per cent) feel that a recovery in the global economy would be helpful in
kick starting the private investment cycle. Additionally, a big share of the respondents (37 per cent) feel
that an upturn in the consumption cycle can also help in boosting private investment.
GENERAL BUSINESS PROSPECTS
5
Decline in
interest rates
17%
Turnaround
in global
economy
40%
Consumptio
n cycle
upturn
37%
Any other
6%
Ways to jumpstart the Private Investment cycle
(% of Respondents)
Increased
government spending
43%
Increased Private
consumption
expenditure
41%
Any other
16%
Factors responsible for Corporate turnaround
(% of Respondents)

CAPACITY UTILISATION
Close to half of the respondents (47 per cent) expect capacity utilization to improve to 75-100% level
in Apr-Jun 2016 quarter.
Largest share of the respondents (47 per cent) expect that capacity utilization would stand in the range
of 75-100% in Apr-Jun 2016 quarter as compared to 32 per cent of the respondents who witnessed the
same in the previous quarter (Jan-Mar 2016). The expectation of an improvement in capacity utilization
in the Apr-Jun 2016 quarter comes despite the fact that a major share of the respondents (39 per cent)
recorded the actual level of capacity utilization in the 50-75% level in Jan-Mar 2016.
INVESTMENT PLANS
Majority of the firms expect no change in their domestic and international investment plans in Apr-
Jun 2016.
Half of the firms expect to maintain status quo on their plans about investing in the domestic economy
in Apr-Jun 2016 quarter. On the international front as well, a significant proportion of firms (60.5 per
cent) expect to keep their investment plans unchanged in Apr-Jun quarter.
Firms are keeping investment plans on hold despite the expectation of an improvement in sales and new
orders in the Apr-Jun 2016 quarter owing to the existing excess capacity in the economy
24
39
32
5
11
37
47
5
Below 50% 50-75% 75-100% > 100 %
Capacity Utilisation ( % of Respondents)
Actual (Jan-Mar 2016) Expected (Apr-Jun 2016)
Investment Plans for Apr-Jun 2016 (% of Respondents)
A 2014
7.7
42.7
49.7
14.9
24.6
60.5
Decline Increase No change Decline Increase No change
Domestic Investments International Investments
6

OVERALL TRENDS
OVERALL SALES & NEW ORDERS
Close to two thirds of the respondents expect an improvement in sales and new orders in the Apr-Jun
2016 quarter.
Firms seem to be upbeat about their sales and new order projections for the Apr-Jun 2016 quarter with
61 per cent of the respondents expecting an increase in sales, while only 42% of the respondents
experienced the same in the previous quarter. On similar lines, nearly two thirds of the respondents (65
per cent) anticipate an increase in new orders in the Apr-Jun quarter as compared to 40 per cent who
witnessed the same in the preceding quarter.
Expectations of increase in sales and new orders this quarter have been based on a majority of
respondents witnessing the uptrend in the same in Jan-Mar 2016 quarter.
EXPENDITURE
20
42
38
18
40 41
8
61
31
12
65
23
Sales Count of New Orders
7
Overall Sales & New orders
(% of Respondents)

While an almost equal share of respondents expect the cost of raw materials and fuel to either
increase or remain unchanged in Apr-Jun 2016, a significant majority anticipates an increase in wages
and salaries and unchanged credit cost in the said quarter.
The recent increase in global commodity prices seems to have made the respondents unsure about their
expectations of raw material and fuel costs in Apr-Jun 2016 quarter. Around 47 per cent of the
respondents expect the raw material cost to remain unchanged in Apr-Jun 2016 and an almost equal
share of respondents (46 per cent) expect their cost the increase. Similarly, about 48 per cent of the
respondents anticipate status quo on fuel costs, however an equally large proportion of respondents (46
per cent) expect an increase in the same.
Nonetheless, there is a clear majority of respondents who feel that credit cost will remain unchanged
(60.3 per cent) while wages and salaries may increase (63 per cent) in Apr-Jun 2016.
PROFITS AFTER TAX
Close to 50 per cent of the respondents anticipate an increase in after tax profits in Apr-Jun 2016.
Profit expectations have improved significantly for the Apr-Jun quarter with a majority of the
respondents (48.7) expecting an increase in profits after tax as compared to 29.2 per cent who
witnessed the same in the previous quarter. The respondents seem upbeat about their profit
expectation for Apr-Jun 2016 quarter despite the fact that a large share of respondents (36.9 per cent)
experienced a decline in after tax profits in the previous quarter.
11.8 7.1 4.5 7.0
1.9 3.4 6.1 6.4
41.4 46.1 47.4 45.5
62.6 63.0
43.2
33.3
46.7 46.8 48.1 47.6
35.5 33.6
50.7
60.3
Actual (Jan-
Mar 2016)
Expected
(Apr-Jun
2016)
Actual (Jan-
Mar 2016)
Expected
(Apr-Jun
2016)
Actual (Jan-
Mar 2016)
Expected
(Apr-Jun
2016)
Actual (Jan-
Mar 2016)
Expected
(Apr-Jun
2016)
Total Raw Material Cost Electricity and Fuel Cost Wages and Salaries Cost of Credit
Decline Increase No change
Input Costs
(% of Respondents)
Profits after Tax
(% of Respondents)

EXPORT AND IMPORT TRENDS
Majority of the respondents expect no significant change in external trade in Q1 FY17.
Major share of the respondents expect status quo on the external trade situation. More than half the
respondents expect no change in their export orders in Apr-Jun 2016 while nearly two thirds of the
respondents (63.9 per cent) anticipate the same for their import orders.
However, there has been an improvement in the proportion of respondents anticipating an increase in
external trade versus those who actually witnessed the same in the previous quarter.
BUSINESS CONCERNS
Low domestic demand and fragile global economic recovery emerge as the top concerns this quarter.
36.9
29.2
33.9
18.6
48.7
32.7
Decline Increase No change
18.9
27.3
53.8
16.0
20.8
63.2
7.4
41.3
51.2
9.2
26.9
63.9
Exports Imports
Exports and Imports
(% of Respondents)
Top-most Concern
(% of Respondents)
98

COVERAGE & METHODOLOGY
CII’s 95th
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 2016, covering more than 200 firms of varying sizes. Majority
of the respondents (44 per cent) belonged to small-scale and micro firms, while 42 per cent were from
large-scale firms and about 14 per cent were from medium-scale firms. Sectoral break up shows that 62
per cent of the respondents were from manufacturing sector while 32 per cent were from services
sector and 6 per cent from primary 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 respondent’s 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.
35
25
24
13
3
Low domestic demand
Fragile global economic recovery
Lack of political consensus on economic
reforms
High borrowing cost
Upward risk to food inflation
10

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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.
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