India Inc's business optimism has recorded a 9 per cent fall for the April-June quarter this year, as the corporate sentiment has been adversely affected by the moderation in growth, high inflation and global credit squeeze, a latest survey says.

According to a report by global research firm Dun & Bradstreet, the composite Business Optimism Index for the second quarter of 2008 has decreased to 153.7 from 168.9 in the previous quarter.

"Decline in confidence is reflective of the uncertainty prevailing in the business environment. Moderation in growth, high inflation and the global credit squeeze have adversely affected corporate sentiment, as is evident from the optimism index for net profits sliding to a 14-quarter low," D&B-India Chief Operating Officer Kaushal Sampat said.

On a year-on-year basis, the Business Optimism Index (BOI) declined by 23.6 per cent, however, this is partly due to the high base of the previous year.

BOI measures the pulse of the business community and serves as a reliable benchmark for investors and is arrived at on the basis of a quarterly survey of business expectations.

Five out of the six optimism indices based on volume of sales, net profits, new orders, inventory levels and selling prices have recorded a drop compared to the previous quarter, the report said.

The optimism index for profits, which stands at 55 per cent the lowest in 14 quarters, represents a decrease of as much as 21 percentage points, compared with the previous quarter.

Going forward, the impact of measures taken to contain domestic inflation would play a key role in determining business expectations over the next quarter.

Besides, the rapidly evolving dynamics of the US economy over the coming months would continue to have an impact on domestic business sentiment, Sampat added.

However, the optimism index for employees remains almost unchanged from the previous quarter. Amongst the sectors surveyed, the services sector and the capital goods sector were the least optimistic with respect to expectations for the April-June 08 quarter.

The intermediate goods sector seemed more optimistic amongst the sectors surveyed. A majority of the services sector respondents belong to the IT, financial services and trade segments.

It is possible that the strong rupee, a slowdown in global growth and the bearish stock market sentiments have dampened expectations from this sector, the report added.

A number of firms have also postponed capital raising plans on concerns that the current bearish sentiment in stock markets would make it difficult to garner adequate funds. With the global credit squeeze, firms' access to external funds has been limited while the domestic cost of capital remains high.

Accordingly, with a few firms deferring their capacity expansion plans, it is possible that there is lower demand for certain types of capital goods. With rising input costs, capital goods sector respondents are less optimistic on profit expectations, the report added.

The D&B Business Optimism Index for the second quarter of 2008 was conducted in March, at a time when sentiment was slightly cautious amidst concerns over a slowdown in economic growth and a global credit squeeze.

GDP growth has slowed down from 9.3 per cent during first quarter to 8.9 per cent in second quarter and further to 8.4 per cent during third quarter of fiscal 2007-08.