New Delhi, India - According to the Federation of Indian Chambers of Commerce & Industry (FICCI)’s most recent Business Confidence Survey, India Inc’s confidence has increased. The overall business confidence index was 67.6 in the current round, up from 63.9 previously. In its most recent round, the survey finds an improvement in both current conditions and the expectations of Indian companies. The ‘Current Condition Index’ increased from 62.6 to 66.1 in the previous survey, while the ‘Expectations Index’ increased from 64.5 to 68.4.
The survey, which was conducted in April 2022, gauged respondents’ expectations for the period from April to September 2022. Participants in the survey represent a diverse range of business sectors. The findings reflect improved confidence among industry members in some operational parameters, such as sales and investments, in the near term.
In the current survey, for example, the proportion of respondents expecting better sales prospects in the near term was 62 percent, up from 50 percent in the previous round.
According to the latest survey results, the demand situation is gradually improving. In the current survey round, 46 percent of participants cited low demand as a constraining factor, compared to 60 percent in the previous round and roughly 70 percent last year. Furthermore, the investment outlook of participating companies has improved noticeably. A little more than half of respondents anticipated higher investments, compared to 40% in the previous round.
Improvements have also been observed in the parameter of capacity utilization levels, with 45 percent of respondents indicating a capacity utilization of more than 75 percent in the current survey round. In the previous round, it was 30 percent. However, rising raw material prices, combined with ongoing geopolitical tensions, are weighing heavily on the near-term outlook for profits. As a result, the percentage of participants expecting higher profits in the next six months fell to 22 percent in the most recent survey, down from 30 percent in the previous round.
Geopolitical tensions are causing significant uncertainty. The Russia-Ukraine conflict has a negative impact on already high global commodity prices and has raised new concerns about global recovery. Moreover, production costs have been rising for the past six months, and the current conflict has increased upward pressure on the prices of key industrial inputs.
In the current survey, approximately 84 percent of the participating companies cited higher raw material costs as a significant impediment to their businesses. In the previous round, the figure was 82 percent.
Furthermore, 48 percent of respondents reported an increase in their production costs by a margin greater than 10 percent. On the other hand, approximately 43 percent pointed to an increase of 5 to 10 percent. 9 percent of respondents reported an increase in production costs of up to 5 percent.
Participants emphasized the increasing difficulties in coping with rising cost pressures, which are being passed on to consumers. 77 percent of participants acknowledged that higher costs were passed on to consumers.
Around 57 percent of companies passing on a portion of their overall cost increases to consumers said they had passed on more than 10 percent of the increased costs to the final consumers (vis-a-vis 34 percent stating likewise about two quarters ago). 22 percent of respondents said they had passed on more than 20 percent of the cost increase to their customers.
However, 43 percent of participants reported that they had passed on less than 10 percent of the increased costs to their customers. 66 percent was the corresponding figure about two quarters ago.
The Export Outlook also showed a slight deterioration. According to the most recent survey, 34 percent of respondents expect ‘higher to much higher’ exports over the next two quarters. However, this figure was two percentage points lower than the previous round’s 36 percent. Despite India’s robust export prospects, global trade is expected to slow due to the protracted nature of the ongoing conflict between Russia and Ukraine.
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