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Home > Business > Business Headline > Report

Business confidence falls 2.9%: NCAER


BS Corporate Bureau in New Delhi | May 22, 2003 10:57 IST

The National Council for Applied Economic Research's quarterly business confidence index declined 2.9 per cent to 111.9 in April from 114.8 in January because of the Iraq war. The index has declined for the first time since October 2001.

The decline in business confidence is accompanied by lower ratings for the investment climate and the financial position of companies, the council's quarterly business expectations survey says.

While consumer durables is the least optimistic of all the sectors, the south appears to be the least optimistic about business prospects. However, smaller firms appear to be more optimistic than the larger firms, the survey says.

Though there was some variation in the pattern of positive and negative impact of the Budget for 2003-04 across sectors, industry had taken it in its stride, the council said.

"The level of satisfaction with regard to the treatment of taxes in the Budget is more pronounced in the consumer non-durables sector compared to other sectors," it said.

Despite a subdued business sentiment, companies are expecting sales, exports and production to go up during the next six months. However, imports of raw materials do not look promising, the survey points out.

The trend is in favour of hiring unskilled permanent or casual labourers on better wages. Earlier, term loans were available to large firms at lower interest rates than small firms, but now long-term loans are available to all firms at lower interest rates, the survey says.

It adds that a higher proportion of large firms expect their expenditure on infotech equipment and software to go up in the next six months.

Unlike the previous survey, where all the four components of the business confidence index  -- overall economic conditions, investment climate, financial position and capacity utilisation -- had moved up together, the current one shows that they have moved in different directions due to macroeconomic expectations and firm-level experiences.

In the current survey, the percentage of firms expecting overall economic conditions to improve in the next six months has remained almost the same.

However, the proportion of respondents seeing a positive investment climate has fallen 2.7 per cent.

The survey points out while the perception of respondents about the overall economic conditions could be linked to buoyant domestic demand, their perception about the investment climate could have been affected by the Iraq war and the failure of the Budget in removing policy uncertainties affecting investment demand.


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