India Inc’s Confidence is up according to FICCI Business Confidence Survey

The recent survey by the Federation of Indian Chambers of Commerce & Industry (FICCI) shows an improvement in confidence in several Indian businesses. The general business confidence index, previously at 63.9, is now at 67.6. The current condition and expectation indices have also increased from 62.6 to 66.1 and 64.5 to 68.4, respectively.

FICCI carried out this survey in April 2022 and evaluated the respondents’ expectations between April 2022 and September 2022. The study results indicated improved confidence in a couple of parameters, including sales and investments. For instance, the percentage of respondents expecting improvement in sales was 62%, up from 50% in the last survey.

The number of respondents that cited low demand as a constraining factor also reduced from 60% to 46%. The results also indicated a noticeable improvement in the investment outlook; more than 50% of respondents expected higher investments, up from 40% in the previous survey.

The survey also showed improvement in capacity utilization levels. 45% of respondents reported a capacity utilization of more than 75%, up from 30% in the previous survey. However, several businesses have expressed their concern about the rising production costs due to the ongoing geopolitical tensions. When it comes to expected profits, 22% of respondents expect higher profits in the next six months, down from 30% in the previous survey.

In this survey, 84% also reported an increase in costs of raw materials as a stumbling block to their business. This number was 82% in the previous study. On the same matter, 48% of respondents reported an increase in total production costs by over 10%. 43% reported an increase between 5 to 10%, and 9% reported an increase of not more than 5%.  77% of these participants said that these extra will have to be passed on to the final consumer.

57% of companies passing on the cost to consumers agreed to pass on more than 10% of the increased costs to the final consumers. This number was 34% two quarters ago. 22% confessed to having passed over 20% of the cost increase to their customer. 43% reported passing over less than 10 percent of the increased costs to their customers. This number was 66% two quarters ago.

When it comes to exports, the report shows that 34% of the respondents expect ‘higher to much higher’ exports in the next two quarters. The corresponding figure in the previous round was 36%.

Overall, experts expect global trade to slow down due to the conflict between Russia and Ukraine. This could hurt India’s robust export prospects.