Indian Economy Expected to Perform Better in 2nd Half of FY 16: Survey

Indian economy would be performing better in the second half of the current fiscal and the trend appears to have begun from the quarter beginning October, 2016 with 66.7 per cent of the latest ASSOCHAM Bizcon Survey respondents expecting uptick in sales, capacity utilization, though positivity on fresh investment is tentative.

NEW DELHI: Increased spend on infrastructure development, largely in the government is seen as the most important driver for a turnaround in the economic outlook for the current quarter and the last quarter of the financial year 2016-17.

The second best driver for the optimistic outlook is effective policy reforms followed by a stable foreign exchange rate of the Indian currency despite global head winds like uncertainty on account of the Federal Reserve’s next policy move and the most bitterly fought US Presidential elections.

While a big chunk of Bizcon Survey participants felt the present economic situation appears to be in a better shape than the previous six months on several parameters, the optimism is more pronounced for the second half of the current fiscal.

For instance on the parameter of industrial performance, the ASSOCHAM Bizcon done in September , noted over 83 per cent of the respondents believing things would look better in at the industry level in the ongoing six month period.

“Good thing is, there is a clear turnaround in business confidence, which holds the key to new investment and consumer confidence”, the chamber President Mr. Sunil Kanoria said. He said unlike the previous surveys, the latest round indicates a slight uptick even with regard to capacity utilization going forward and the order book. However, generation of new employment and improvement in wages is still some distance away.

The confidence was quite pronounced at the level of individual firms’ level, as about 89 per cent of the respondents expressed optimism about better days ahead.

In terms of the capacity utilization expectations, over 66 per cent participants shared the opinion that the industry would be operating at higher levels than 70 per cent of the plant or service facility capacities.

The majority (55.6 percent) of the respondents feel that there is an increase in the sales volume during July to September 2016 and also expecting better sales volume during October to December 2016. However, 38.9 percent of the respondents feel that their profits may not change in the short term (October to December 2016). “The power to increase price on the part of producers and service providers would remain constrained till there is some more improvement in the consumer demand”, Mr Kanoria said.

In the short horizon, the survey indicates that there will not be any change in the employment scenario in the industry. As majority (55.6 percent) of respondents believe that employment condition will not improve in the coming days.

In terms of the wage costs scenario, the majority of the industry (44.4 percent) opines that in the July to September 2016, there is no change in wages costs. Going forward as well, majority of the industry respondents (50.0 percent) feel that the wage costs will not change in future also (October to December 2016).

As many as, 38.9 per cent respondents felt that there was an increase in the raw material prices. In the shorter horizon industry is not confident about the raw material price witnessing much movement.