The industry is upbeat on India's growth prospects after the new government led by Prime Minister Narendra Modi took charge at the Centre, according to the Business Outlook Survey by CII.
Indicating a sharp improvement in investors' sentiments amidst heightened expectations that the new government means business, most respondents exuded confidence about prospects related to economic growth, decline in price rise and twin deficits -- fiscal and CAD -- recovery in exports, buoyant foreign capital inflows and strengthening of the rupee.
Consequently, the CII Business Confidence Index for the April-June quarter inched up to 53.7 from 49.9 in the previous quarter. The number 50 is the dividing line on the index between positive and weak business confidence.
According to the survey, while growth is expected to pick up from 4.7 percent in 2013-14 to between 5.5 and 6 percent in FY15, wholesale price inflation is expected to moderate to between 5.5 and 6 per cent in the current fiscal.
"The expectation that a stable government at the Centre would bring growth back to India, along with a mild upturn in some economic indicators in form of recovery in exports, decline in twin deficits, buoyant foreign capital inflows, strengthening rupee and moderating inflation has provided a big boost to business sentiments in the country".
"We expect the index to gather momentum in the coming days, riding on improved sentiments and business confidence," CII Director General Chandrajit Banerjee said.
The survey is based on responses from over 150 industry members. Majority of the respondents (50 percent) belong to large-scale sector, 13 per cent medium scale companies, 31 percent small-scale and 7 percent micro firms. Further, 54 per cent of the respondents were from the manufacturing sector while 45 percent were from services.
The industry cited economic uncertainty, low GDP growth and high inflation as its top-most concerns, highlighting the need for stepping up efforts in the direction of improving business sentiments and removing supply bottlenecks.
"We are pleased to see that the new government is already working in this direction and it is only a matter of time when fundamentals of the economy will start falling in place," said Banerjee.
Reflecting uptick in demand, the survey found that most businesses, besides increasing new investment, have started experiencing a rise in capacity utilisation, which augurs well for turnaround of the economy.
The expectation of higher economic growth during 2014-15 is rooted in optimism about the overall demand situation. As high as 56 per cent of the respondents expect their sales and new orders to increase in the first quarter of 2014-15, which is much higher than the previous quarter wherein only around 35 percent respondents expected a rise in sales.