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Mild optimism on economy

New Delhi, June 6: India Inc is moderately upbeat about the economy in the first half of this fiscal.

A CII business confidence survey puts the Indian businessmen weighted current situation index and the expectation index at 61.6 points implying ‘moderate positive confidence’, which is far below 75-point level that would have exhibited strong positive confidence.

CII’s business confidence index revealed that the majority respondents are looking for fresh capital investments, double-digit production growth and capacity utilisation in their existing business units. While 57 per cent respondents were looking at fresh capital, 93 per cent respondents envisaged growth in production for their own company rather than for the economy as a whole.

Nearly 50 per cent respondents were of the view that they achieved capacity utilisation between 75-100 per cent during the last six months. However, the survey says that in the coming six months almost 62 per cent of respondents are expecting the same level of capacity utilisation.

Although almost 29 per cent of respondents experienced a decline in the level of employment in their companies, another 28 per cent stated that they had employed additional human capital in the previous six months. The remaining 43 per cent reported no change in their level of employment.

Indicating inventory levels, while 27 per cent respondents exhibited an increase in their inventories, 44 per cent recorded no change in the past six months. The majority of the 60 per cent respondents expect no change in their inventory levels in the coming six months.

The survey states that in the next six months a lower number of firms (22 per cent) are expected to witness a decline in profit margins and a higher number of firms (40 per cent) expect no change.

While the last business outlook survey revealed that domestic economic scenario and lack of sufficient orders were the two most limiting factors to an increase in output, the current survey held after war in Iraq came to an end reflects concern amongst the Indian industry regarding slow recovery in the United States and other key global economies.

In terms of infrastructural bottlenecks, power continues to be the most vexing problem. However, telecom sector has received the highest rating of 4.23 points against 3.98 points in the last survey.

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