CII: Plight of rising input cost

According to CII's quarterly Business Outlook Survey, the Business Confidence Index (CII-BCI) for April-June 2011 has declined by 4.2 points as compared to a 0.5 points increase in the previous quarter.

The top three business concerns revealed in the survey were High Raw Material Cost, Infrastructural and Institutional Shortages and High Interest Rates. In the area of infrastructure, most respondents felt that road, railway transportation, port shipping facilities, Power/ Electricity and irrigation facilities in the country are inadequate while Telecom, Internet/ Broadband and Postal/ Courier facilities were categorized as good.

The CII Business Outlook Survey revealed that 82.5 percent and 41.7 percent of the firms in the manufacturing and services sector respectively, experienced rise in overall input costs in the last quarter of 2010-11 and majority continue to expect it to remain high.

The CII survey, which is based on a large sample size of 300 companies, revealed that majority (33 percent) of the respondents expect GDP growth rate to be in the range of 8.0-8.5 percent, while 29 percent, expect it to be above 8.5 percent. On inflation, 48 percent of the respondents expect average inflation for 2011-12 to be above 8.0 percent.

Compared to the expectation in the previous survey, the current survey reveals that the actual growth in sales in April-June 2011 was lower. The difference in the actual and expected proportion of respondents who experienced an increase in sales hints that there might be a slow down in consumer demand. Similarly, the share of people who expect production to decrease in April-June 2011 has gone up substantially in comparison to the actual proportion of respondents who experienced a decline during the quarter ending March 2011.