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The Confederation of Indian Industry (CII) has said that its latest Business Confidence Index for the October-December quarter rebounded to highest reading in almost two years of 67.6 from 62.2 in the previous quarter, reflecting optimism around India being in a 'sweet spot' despite the rising global uncertainties. It added the sharp improvement in the value of the index was buttressed by subsiding of concerns around the impending recession and its impact on the Indian economy.

The Index is based on the findings of a survey of over 120 firms of varying sizes and across all industry sectors and regions of the country. However, a majority (70 per cent) of the survey respondents feel that the Indian economy will expand in a range of 6.5 per cent to 7.5 per cent in the current financial year ending March from 8.7 per cent in the last fiscal. It said ‘Growth is expected to moderate further in the next year on global headwinds. Hence, to support growth, it is critical that RBI refrains from raising the interest rates any further’.

The survey revealed that nearly half of the respondents (47 per cent) have indicated that they have already started feeling the impact of the policy rate hikes by the RBI on the overall economic activity. High interest rates have impinged on private investment levels too. Currently most of the heavy lifting to support growth is being done by public capex, with private capex playing a supporting role. Even as global economic growth is witnessing headwinds due to the tightening financial conditions and geopolitical tensions, an overwhelming 73 per cent of the survey respondents expect only a moderate impact on the Indian economy.

CII said the confidence among respondents stems from the fact that 86 per cent believe the government's focus on infrastructure is the biggest positive for the Indian economy, followed by improvement in tax collections and good consumption recovery. In addition to high borrowing costs, the prevailing heightened uncertainty has prevented firms from furthering their investment plans. However, the survey results present an encouraging prognosis with 90 per cent feeling that their company's investment cycle will recover during the next fiscal.

Around 52 per cent expect recovery during the first half of the next fiscal while about 37 per cent of them foreseeing a pickup in investments by the second half of the year. Nearly half of the survey respondents feel that the capacity utilisation levels in their companies would range between 75-100 per cent during the Oct-Dec quarter. CII said it is encouraging to note that given its bearing on the overall economy, a recovery in the rural demand is eagerly awaited and about 60 per cent of the respondents feel that a pick-up in rural consumption will take place in the next fiscal.