Indian industry remained optimistic about the overall business prospects during the current quarter, but a monetary tightening and high cost of borrowing are key concerns, said a Confederation of Indian Industry (CII) survey.
According to the chamber's survey, the business confidence index (BCI) for January-March 2010-11 stood at 68.7 as compared to 67.3 in the previous quarter.
“The prospect for the coming quarter appears to be brighter...,” it said.
The respondents in the survey are asked to provide a view on the performance of their company, their sector and the economy based on their perceptions.
The CII-BCI is then constructed as a weighted average of the current situation index (CSI) and the expectation index (EI). The current situation index (CSI) compares the current business conditions in relation to the previous quarter.
The CSI fell to 62.7 for the third quarter of this financial year as compared to 64.0 for the second quarter.
The expectation index, on the other hand reflects the expectation of respondents about the coming quarter in comparison to the current quarter.
“The decline in the CSI can be explained by tightening monetary policy, higher inflation and rising input costs in the past quarter. However the prospect for the coming quarter (January-March 2011) appears to be brighter as depicted by the expectation index,” said Chandrajit Banerji, director general, CII.
The industrial production growth fell to 1.6% in December, the slowest in 20 months from 3.6% in the previous month adding another set of worries to government’s macro economic managers who are grappling for options to sustain growth and keep prices under check.
The RBI has raised key policy rates seven times so far in 2010-11 to cool prices as s food prices raced into high-double digits.