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Industry lobby groups’ surveys differ on state of economy

LiveMint logoLiveMint 10-04-2017 Asit Ranjan Mishra

New Delhi: Two separate surveys conducted by two industry lobby groups have painted divergent pictures of the state of the economy and business environment in the country.

While the Business Outlook Survey by the Confederation of Indian Industry (CII) released on Sunday held that the Business Confidence Index has hit an all-time high in the January-March quarter, driven by a significant improvement in present as well as future business prospects, a Federation of Indian Chambers of Commerce and Industry (Ficci) quarterly survey of the Indian manufacturing sector released on Monday showed a decline in manufacturing activity during the same quarter due to rising cost of production, which is impacting competitiveness.

Yet another industrial outlook survey of the manufacturing sector for the December quarter by the Reserve Bank of India released earlier this month showed there is substantial improvement in sentiment on demand conditions, with respondents more optimistic about production, order books and capacity utilisation in the December quarter than a quarter ago.

To be sure, while the Ficci survey is purely based on units from the manufacturing sector, only 64% respondents of the CII survey belong to the manufacturing sector while 35% are from services sector and 1% from the primary sector.

While CII expects higher capacity utilization in the March quarter, Ficci sees a decline. Around 55% of respondents to the CII survey expect capacity utilization to be in the range of 75-100% in the March quarter as compared with 33% of respondents in the December quarter. However, a little over 35% respondents to the Ficci survey in the March quarter reported higher capacity utilisation, a drop from 43% in the previous quarter.

Both CII and Ficci spokespersons refused to comment.

On capacity addition, both CII and Ficci paint a bleak picture, though the Ficci survey is more pessimistic.

According to the CII survey, more than half of the firms (54.2%) expect domestic investment plans to remain unchanged in the March quarter. Concurrently, a significant proportion of domestic firms (65.2%) expect to maintain status quo on their international investments as well during the quarter.

In the Ficci survey, 75% of respondents said that they don’t have any plans for capacity addition in the next six months compared to 77% in the previous quarter.

“The high percentage implies the slack in private sector investments in manufacturing will continue. Increased competition from imports, lack of demand from industrial sectors and OEMs (original equipment makers), and shortage of credit are some of the major constraints affecting the expansion plans of the respondents,” Ficci said in its report.

On exports, those surveyed by Ficci are more optimistic. While 40% respondents in the Ficci survey expect a pick-up in exports, only 26.3% respondents to the CII survey share a similar sentiment.

While 60% of respondents foresee an increase in new orders in the March quarter, according to the CII survey, the Ficci survey says almost 47% respondents expect higher order flow.

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