India Inc's business confidence dips amid gloomy economic scene

Corporate India's confidence level has declined in the second quarter of the current financial year on account of unfavourable business environment at home as well as globally, says a survey.

According to the NCAER-MasterCard Worldwide Index of Business Confidence, India Inc level in the July-September quarter declined to 125.4 from 126.6 in the previous quarter.

A number of indicators support this weak business environment -- the domestic economy is growing at a significantly slower pace than its potential and the world economic growth remains constrained with weak recovery in the advanced economies.

"Moderation in economic growth along with high and stubborn inflation appears to be the main concern in business operation," the report said.

Other issues dampening the business sentiment are elevated interest rates, weak global economy, widening fiscal deficit and policy stagnation.

India's economy grew by 5.3 per cent in the July-September period, pulled down by poor performance of manufacturing and agriculture sectors. The gross domestic product (GDP) had expanded by 6.7 per cent in the same period of the 2011-12 fiscal.

The growth was 5.5 per cent in the first quarter (April- June) of 2012-13.

According to the report, the fresh wave of policy decisions in mid-September that included increase in prices of diesel, limiting subsidy for LPG and FDI related measures may improve business sentiments in the coming months.

Although the rate of decline is much lower or almost negligible when compared to the massive fall of last round, it reflects concerns in the short run, the report said.

During the quarter ending June, India Inc's business confidence had declined by 6.2 per cent to 126.6 points from 134.9 points in the March quarter.

The survey measures business confidence on four indicators -- overall economic situation six months from now, financial position of the firm six months from now, investment climate and level of current capacity utilisation.

The survey also focuses on Political Confidence Index (PCI), which has increased by 1.2 percentage points in October 2012 over the last quarter.

However, four out of the eight indicators of PCI such as managing inflation, managing unemployment, managing conductive political climate and pushing economic reforms forward – have witnessed a decline, the report said.