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02-Nov2016

Indian economy likely to perform better in 2nd half of FY17: Assocham

The Associated Chambers of Commerce & Industry of India (Assocham) in its latest survey report that is based on 'ASSOCHAM Bizcon Survey' stated that Indian economy is expected to fare better in the second half of the current fiscal and the trend appears to have begun from the quarter beginning October, 2016 backed by uptick in sales and improved capacity utilization, though fresh investments and new jobs creation may be a concern going forward.

The report said that the second best driver for the optimistic outlook are effective policy reforms followed by a stable foreign exchange rate of the Indian currency despite global head winds like uncertainty on account of the Federal Reserve's next policy move and the most bitterly fought US Presidential elections. While a big chunk of Bizcon Survey participants felt the present economic situation appears to be in a better shape than the previous six months on several parameters, the optimism is more pronounced for the second half of 2016-17.

As per the survey, an increased spending on infrastructure development, largely by the government, is seen as the most important driver for a turnaround in the economic outlook for the period between October and March in 2016-17. Further, over 66 percent respondents participated in the Assocham Bizcon Survey are expecting improved sales and capacity utilisation during the second half of the fiscal, but remained uncertain on fresh investments coming in. However, in the short horizon, the survey indicated that there will not be any change in the employment scenario in the industry. As majority (55.6 percent) of respondents believe that employment condition will not improve in the coming days. Besides, 38.9 per cent of the respondents feel that their profits may not change in the short term, October to December.

Further, the confidence was quite pronounced at the level of individual firms' level, as about 89 percent of the respondents expressed optimism about better days ahead. The majority (55.6 percent) of the respondents feel that there is an increase in sales volume during September quarter and also expecting more sales during October-December 2016. In terms of the wage costs scenario, the majority of the industry (44.4 percent) opines that in the July to September 2016, there is no change in wages costs. Moreover, half of the respondents felt that wage costs will not change in the near future.

According to Assocham, good thing is that there is a clear turnaround in business confidence, which holds the key to new investment and consumer confidence. The latest survey indicates a slight uptick even with regard to capacity utilization going forward and the order book. However, generation of new employment and improvement in wages is still some distance away. The Reserve Bank of India expecting the economy to grow 7.6 percent in the current fiscal, but the Bizcon Survey did not give an estimate of economic growth in the coming quarter.


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