The Federation of Indian Chambers of Commerce and Industry's (FICCI) latest Business Confidence Survey reported improvement in confidence levels of Indian companies. The Overall Business Confidence Index was recorded at 67.6 in the current round, compared to the previous 63.9.

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According to the survey, there was improvement in both — present conditions and the Indian companies' expectations in the current round. "The Current Condition Index improved to 66.1 from 62.6 in the last survey, while the Expectations Index improved to 68.4 from 64.5," a statement issued by FICCI said.

The survey, which was conducted in April 2022, gauges the expecations of the respondents for the April to September period. The participants of the survey belong to an array of business sectors.

The findings reflect improved confidence amongst industry members in the near term on some operational parameters, including sales and investments. For instance, the proportion of respondents anticipating better sales prospects over the near term stood at 62% in the current survey - higher than 50% in the previous round.

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"As reflected in the latest survey results, the demand situation is progressively witnessing an improvement. In the current survey round, 46 percent of the participants cited weak demand as a constraining factor vis-à-vis 60 percent stating likewise in the previous round and about 70 percent citing the same last year," the statement said.

The participating companies' investment outlook also reported a discernible improvement. "A little over 50 percent of the respondents anticipated higher investments vis-à-vis 40 percent stated likewise in the previous round," it added.

There were improvements noticed on the capacity utilisation parameter as well, where 45 percent of respondents indicated a capacity utilisation of more than 75 percent in the latest survey round. In the previous round, it was 30 percent.

However, the escalating prices of raw material amid geopolitical tensions are weighing heavy on the near-term outlook for profits, the statement said. "As a result, the percentage of participants citing higher profits over the next six months declined to 22 percent in the latest survey from 30 percent of respondents in the previous round," it added.

"The geopolitical stress is causing considerable uncertainty. The Russia-Ukraine conflict impacts already high global commodity prices and has raised fresh concerns regarding global recovery. Moreover, the cost of production has already been on the rise for the past six months, and the current conflict has further raised upside pressures on the prices of key industrial inputs," the statement said.

In the present survey, around 84 percent of the participating firms stated higher raw material costs as a "significant impediment to their businesses". It was 82 percent in the previous round.

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A total of 48 percent respondents said they saw an increase in their production cost by a margin greater than 10 percent. "On the other hand, about 43 percent pointed to an increase between 5 percent to 10 percent. 9 percent of respondents stated a rise in production cost by up to 5 percent," the statement said.

"The participants underscored the increasing difficulties in enduring the rising cost pressures; the same is being passed on to the consumers. 77 percent of the participants acknowledged the passage of higher costs to the consumers," the statement said.

Among the firms passing on the rise in their overall costs to consumers, about 57 percent said they passed over 10 percent of the risen costs on to the final consumers (vis-à-vis 34 percent stating likewise about two quarters ago). 22 percent of the respondents reported that they had passed on over 20 percent of the rise in costs to their consumers, the statement said.

However, around 43 percent of the respondents said they only passed on less than 10 percent of the risen cost to their customers. The corresponding number around two quarters ago was 66 percent.

The Outlook on Exports reported a slight deterioration as well. "In the latest survey, 34 percent of respondents said they foresee ‘higher to much higher’ exports over the next two quarters. However, this number was two notches lower than the corresponding 36 percent seen in the previous round. Even though India's export prospects have been robust, global trade is expected to witness a slowdown given the extended nature of the ongoing conflict between Russia and Ukraine," the statement said.

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First Published:May 8, 2022 1:07 PM IST