Business Confidence Survey Q1 2012 - FICCI

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FICCI‘s Business Conf idence Survey: Q1 FY13

HIGHLIGHTS

The global economy is once again in a difficult situation. Amidst the current state of affairs, the

latest round of FICCI’s Business Confidence Survey reveals the somber mood of India Inc. The

Overall Business Confidence Index for the first quarter of 2012-13 at 51.8. The corresponding

figure in the last survey round was 60.3 (Q4 FY12).

Interestingly, net responses with regard to prospect of employment opportunities has turned

negative, the first time since the 2008-09 crisis. Thus, the current economic slowdown coupled

with a negative growth in the employment prospects, may force the economy into a ‘jobless

degrowth’

The respondents did not seem upbeat with regard to current performance and lacked optimism

about future performance at all the three levels- economy, industry and firm level.

Weak demand continues to be a concern for members of corporate India. Nearly 73% companies

reported weak demand to be a constraining factor. The corresponding figure in the last survey

was 57% and a year back 56%. Also a significant proportion of participants in the current round

indicated cost of credit to be a constraint

In the current survey, the participating companies were asked to indicate the expected GDP

growth for the year 2012-13 on the back of uncertain conditions in the Euro Zone and the

slowdown in the domestic economy. 50% of the respondents believed that the GDP growth could

be less than 5.5%.

Further, a whopping majority of the respondents also indicated that the deficient rainfalls have

had a clear impact on the performance of their industry/sector. About 85% of the respondents

reported that the current drought situation would have an impact on their industry.

FICCI Economics and Research Division

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Survey Profile

The current survey round was conducted for the

first quarter of FY 13 and drew responses from

companies with a wide sectoral and

geographical spread. The participating

companies belonged to varied array of sectors

such as textiles, cement, financial services,

chemicals, metal and metal products,

automobiles, FMCG, electrical equipment and

machinery. The survey was conducted between

the month of July and August 2012 and brings

out expectations of the corporate members for

the period July-December, 2012.

Detailed Survey Findings

The latest Business Confidence Survey for Q1

FY 13 indicates a clear sign of a slowdown with

moderation taking place at the economy,

industry and firm level.

Table 1: Prospects for the next six months

Source: FICCI’s Business Confidence Survey, Q1 FY13

Note: Net responses are measured as the differential

between the companies reporting a positive and negative

responses. Responses indicating status quo are not

reckoned.

The respondents did not seem upbeat with

regard to current performance and lacked

optimism about future performance as well.

Responses indicate that the industry outlook for

the next six months is gloomy on the back of low

investment, exports, profits and sales.

In particular, employment opportunities have

turned worse for the first time since the Lehman

crisis. Thus, the current economic slowdown

coupled with a negative growth in the

employment prospects, is likely to force the

economy into a ‘jobless degrowth’.

India Inc. expects the investment prospects

to be weak over next two quarters…

There is a considerable decline in the number of

total responses who believe investments will be

higher over the next six months.

42% of the respondents in the current survey

said that investments will remain same in the

next six months as compared to 48% in the last

quarter survey. As much as 25% of the

respondents believed that investments will go

down in the next six months as per the current

survey (vis-à-vis 11% last time).

Overall Business Confidence Index Slides…

Exposition 1: Overall Business Confidence

Index

Source: FICCI’s Business Confidence Survey, Q1 FY13

The Overall Business Confidence Index for the

Net

respons

es

Q1’12 Q4’11 Q3’11

Expected

Economic

Situation

Worse -12 36 -13

Expected

Industry

Situation

Worse 19 40 2

Investments Worse 8 30 18

Sales Worse 38 51 30

Selling price Better 12 4 -6

Profit Worse 0 5 -22

Exports Worse 19 22 22

Employmen

t

Worse -4 21 7

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first quarter of 2012-13 stood at 51.8, much

lower than the value of 60.3 reported in the

previous quarter.

Global Economy Still in Doldrums….

The global economy continues to bear an

uncertain outlook. The difficult global situation

coupled with the unfavorable factors on the

domestic front has clearly had an impact on the

performance of the companies. Poor

performance of the industrial production,

persistent inflation and weak rupee has further

added to the worries.

As per the market expectation, the GDP

growth is likely to be around 5.4% in FY13…..

In our current survey, the participating

companies were asked to indicate the expected

GDP growth for the year 2012-13 on the back of

uncertain conditions in the Euro Zone and the

slowdown in the domestic economy.

As can be seen from the table below, 50% of the

respondents felt that the GDP growth would

remain below 5.5%.

Table 2: Expected GDP growth (% of

respondents)

GDP Growth 2012-13

< 5% 19%

5%-5.5% 31%

5.6%-6.0% 38%

>= 6% 12%

Source: FICCI’s Business Confidence Survey, Q1

FY13

Only 12% of the respondents indicated that the

growth would somewhere above 6%.

Constraining factors….

In the present survey round, 73% of the

respondents reported weak demand to be a

constraining factor, compared to 56% reporting

likewise a year ago and 57% in the previous

quarter.

Besides weak demand, increasing raw material

costs was also reported to be a factor bothering

members of India Inc. About 62% of the

companies participating in the survey reported

that rising raw material prices was a worrying

factor for them.

Further as per the current survey results, high

cost of credit acted as a constraint for 62.5% of

the participating companies.

Cost of credit was reported to be a greater

concern for companies with a turnover ranging

between 0-500 crore and 500-1000 crore.

For companies with a turnover between 0-500

crore and 500-1000 crore, 63% and 80% of the

participants respectively believed that the recent

rise in the cost of the credit is a huge problem

for them.

Table 3: Cost of Credit

Company

Turnover (Rs

crore)

High cost of credit

YES NO

0-500 63% 38%

500-1000 80% 20%

1000 and above 33% 67%

Source: FICCI’s Business Confidence Survey, Q1

FY13

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ANNEXURES

FICCI

BCS Q2

2010-11

FICCI

BCS Q3

2010-11

FICCI

BCS Q4

2010-11

FICCI

BCS Q1

2011-12

FICCI

BCS Q2

2011-12

FICCI

BCS

Q4

2011-

12

FICCI

BCS Q1

2012-13

1a Current overall economic

conditions vis-à-vis the last

six months

Moderately to Substantially

better

82 57 47 16 16 38 7

Same / No change

16 19 36 28 31 43 19


worse

2 24 17 56 53 19 74

1b Expectations for overall

economic conditions for the

next six months


better

83 50 49 30 27 49 22

Same / No change

16 38 38 37 33 38 44


worse

1 12 13 33 40 13 34

2a Current industry performance

vis-à-vis the last six months


better

77 57 46 23 18 47 26

Same / No change

20 22 35 35 48 34 33


worse

4 22 20 41 33 19 41

2b Expectations for industry

performance in the next six

months


better

80 54 62 35 33 55 41

Same / No change

20 32 24 37 35 30 37


worse

0 14 14 28 31 15 22

3a Current firm level

performance vis-à-vis the last

six months

78 68 60 31 32 47 36

2



better

Same / No change

21 19 27 42 45 30 28


worse

1 14 12 27 23 23 36

3b

Expectations regarding firm

level performance in the next

six months


better

85 69 64 51 52 56 46

Same / No change

15 22 29 24 25 34 35


worse

0 10 7 25 24 11 19

4 Confidence Indices

Current Conditions Index

75.2 63.5 62.3 46.3 47.4 57.4 45.7

Expectations Index

76.6 64.0 64.4 54.3 53.5 61.7 54.8

Overall Business Confidence

Index

76.2 63.8 63.7 51.6 51.5 60.3 51.8

5 Problem areas

Weak Demand

Yes 26 24 34 56 65 57 73

No 74 76 66 44 35 43 27

Threat of imports

Yes 35 29 27 22 29 17 16

No 65 71 73 78 71 83 84

Constrained availability of

credit

Yes 21 17 20 24 20 23 24

No 79 83 80 76 80 77 76

High cost of credit

Yes 46 53 55 68 58 47 60

No 54 47 45 32 42 53 40

Rising raw material prices

Yes 79 90 85 70 78 79 62

No 21 10 15 30 22 21 38

6 Present capacity utilization

Less than 25% 1 1 2 1 5 7 0

Between 25% and 50% 11 6 8 7 9 13 21

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Between 50% and 75% 27 21 26 29 46 38 46

More than 75% 61 72 64 63 40 42 33

7 Prospects for the next six

months

Investments

Much higher 8 9 7 3 4 7 4

Higher 41 45 40 39 33 34 29

Same / No change 47 33 38 42 44 48 42

Lower 4 13 16 16 19 11 25

Sales

Much higher 7 7 9 6 2 13 0

Higher 67 62 55 52 42 53 50

Same / No change 26 27 28 26 42 21 38

Lower 0 4 9 16 11 13 12

Selling price


Higher 26 53 33 18 13 26 16

Same / No change 71 46 54 60 69 52 72

Lower 4 1 12 22 19 22 8

Profit


Higher 48 33 30 24 19 36 36

Same / No change 46 42 46 43 41 29 32

Lower 6 23 24 31 41 33 36

Exports


Higher 47 46 39 38 35 30 33

Same / No change 43 37 40 38 52 46 43

Lower 6 16 20 19 13 16 19

Employment


Higher 29 41 25 29 19 30 16

Same / No change 67 52 66 61 68 61 64

Lower 1 7 7 6 12 9 20