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On the back of a favourable monsoon, 78 per cent of respondents said they expect inflation this year to remain below 5 per cent | File image
Private capital expenditure by Indian Inc. is likely to increase amid improving domestic demand, despite a weak external environment and rising shipping costs, according to a survey by the industry body Confederation of Indian Industry (CII).
The survey, conducted with over 200 firms of varying sizes, showed that CII’s Business Confidence Index for the July-September quarter (Q2FY25) rose to its highest level since March, reaching 68.2. In the previous quarter, it was 67.3, and in Q2FY24, it stood at 67.1.
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The survey indicated that 59 per cent of respondents anticipate an increase in private capital expenditure (capex) in April-September this year compared to the previous six months.
“Improvement in domestic demand has created a more optimistic business environment, encouraging companies to invest and expand,” the survey noted.
“A significant portion of respondents also believe that the trajectory of private capex will remain unchanged in the first half of the year. Only a small fraction (6 per cent) expects the level of private capex to deteriorate compared to the second half of FY24,” it added.
On the back of a favourable monsoon, 78 per cent of respondents said they expect inflation this year to remain below 5 per cent.
Of these, 33 per cent forecast inflation between 4.5-5 per cent, while 35 per cent expect it to be in the range of 4-4.5 per cent. The Reserve Bank of India (RBI) has projected inflation to be around 4.5 per cent for the year.
Over 60 per cent of respondents believe that the RBI will begin its rate-cutting exercise this financial year. Of these, 34 per cent expect rate cuts in the October-December quarter, while 31 per cent anticipate the cuts to start in the January-March quarter.
“With banking liquidity in surplus in recent periods, we can expect the central bank to provide some easing in interest rates or at least a change in policy stance in the upcoming monetary policy in October,” the survey said.
Thanks to improved domestic demand, particularly from rural India, a majority of companies (53 per cent) reported capacity utilisation levels in the range of 75-100 per cent (46 per cent) and above 100 per cent (6 per cent) during the April-June quarter.
“This is higher than the proportion of respondents (45 per cent) who had experienced capacity utilisation levels in the same range in the previous quarter,” the survey noted.
As many as 45 per cent of companies expect their profits to improve in the July-September quarter, which is slightly higher than the 42 per cent that saw a similar trend in the previous quarter.
Employment opportunities are expected to rise, albeit marginally. Around 49 per cent of companies reported an improvement in the employment situation, while 41 per cent said there had been no change during the quarter.
However, due to external uncertainties, a significant portion of companies (40 per cent) are likely to keep their international investment plans unchanged.
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Indian Inc., private capital expenditure, CII, Business Confidence Index, domestic demand, inflation, RBI rate cut, banking liquidity, capacity utilisation, employment opportunities, international investment, rural demand, April-June quarter, July-September quarter
First Published: Oct 06 2024 | 2:13 PM IST
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