India Inc. confidence sinks sharply: N.C.A.E.R.

New Delhi, Sep 26 (PTI) The confidence of India Inc.
in the country's business environment has dropped sharply
because of high inflation, political uncertainty and volatile
petroleum prices, according to economic think-tank N.C.A.E.R.

Firms, particularly services companies, do not find the
current investment climate positive and there has been a
decline of 30 percent in the outlook of firms regarding
business climate of the country, shows a survey conducted by
the National Council of Applied Economic Research
(N.C.A.E.R.).

The Business Confidence Index (B.C.I.) fell by 22.9
points from 148.5 points (as captured by the survey of April)
to 125.8 points as calculated by the N.C.A.E.R.'s latest
survey conducted in July.

The index includes companies' perception of overall
economic conditions prevailing over the next six months,
financial position of the concerned firm over the next six
months, prevailing investment climate in the economy and
capacity utilisation.

"At the aggregate level, there is a 19 percent decline
over the previous quarter for overall economic conditions over
the next six months," N.C.A.E.R. said in its monthly report
Macrotrack.

The services sector's responses indicated the greatest
fall, it said.

Also, the assessment of financial position of firms over
the next six month, shows that the consumer durables goods
sector has the greatest drop among the proportion of firms
with an optimistic short-term outlook.

The percentage of firms expecting improvement in their
financial position has declined sharply.

The drop in confidence, the N.C.A.E.R. said, "appears to
be consistent with the rising uncertainty with respect to
inflation and growth, particularly at the global level."

The think-tank said that the financial markets crisis in
the U.S. coupled with weak economic growth in developed
economies led to slower growth in trade volumes this year.

The economic body said poor investment climate in the
country reflects that the spending in capital goods sector has
decreased which in turn led to decline in the levels of
spending by other sectors of the economy.

Further, inflation has severely hit intermediate goods
sector and there would be a negative impact on demand for
these products, the N.C.A.E.R. said.

Another interesting fact which appeared in the survey is
that the B.C.I. in the western region suffered the maximum
setback, even though it is a commercial hub of the economy,
the N.C.A.E.R. said adding that the sentiments here reflect
the trends in the business sector.

Thus, it said, it is indicative of "significant
deterioration in business sentiments."