Indian economy expected to have positive outlook in H2 FY'17: ASSOCHAM Bizcon Survey

Indian economy is expected to gain momentum in the second half of the current fiscal year according to the Assocham Bizcon Survey.

The economy shall fare well in the second half of the year, fueled by uptick in sales and improved capacity utilisation. However fresh investments and new jobs creation may have a dampening effect on the growth of the economy. 

Besides, 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 this fiscal, it added.

Over 66 per cent respondents polled in the Assocham Bizcon Survey expected improved sales and capacity utilisationduring the second half of the fiscal, but remained uncertainon fresh investments coming in.

However, in the short horizon, the survey indicates that there will not be any change in the employment scenario in theindustry. As majority (55.6 per cent) of respondents believethat 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.

The second best driver for the optimistic outlook areeffective 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 shapethan the previous six months on several parameters, theoptimism is more pronounced for the second half of 2016-17.

"Good thing is, there is a clear turnaround in business confidence, which holds the key to new investment and consumerconfidence," Assocham President Sunil Kanoria said.     

He said unlike the previous surveys, the latest roundindicates a slight uptick even with regard to capacityutilisation going forward and the order book. However, generation of new employment and improvement in wages is still some distance away.

The confidence was quite pronounced at the level ofindividual firms' level, as about 89 per cent of therespondents expressed optimism about better days ahead.     

The majority (55.6 per cent) of the respondents feel thatthere is an increase in sales volume during September quarterand also expect more sales during October-December 2016. "The power to increase price on the part of producers andservice providers would remain constrained till there is somemore improvement in the consumer demand," Kanoria said.

In terms of the wage costs scenario, the majority of theindustry (44.4 per cent) opines that in the July to September2016, there is no change in wages costs. Moreover, half of therespondents felt that wage costs will not change in the nearfuture. The economy grew at the slowest pace in last six quarters at 7.1 per cent in April-June this fiscal, mainly on subdued performance of mining, construction and farm sectors.

The Reserve Bank expects the economy to grow 7.6 per centin the current fiscal. The Bizcon Survey did not give anestimate of economic growth in the coming quarter.