India Inc's biz confidence shows signs of turnaround

India Inc's business confidence for the October-December quarter is witnessing signs of "turnaround" on account of recent reforms push, which has lifted domestic sentiment and renewed foreign investors interest as well, says research firm Dun & Bradstreet.

For the fourth quarter of this calender year, the Dun & Bradstreet Composite Business Optimism Index stood at 140.8, registering an increase of 3.4 per cent as compared to the third quarter (July-September) this year.

However, on a year-on-year basis, the optimism for the coming three months still represent a decline of 2.1 per cent compared to corresponding quarter last year, the report said.

"D&B Business Optimism Index for Q4 2012 improved, drawing support from the recent reform measures announced by the Government," Dun & Bradstreet India President and CEO Kaushal Sampat said.

Sampat further said that the slow pace of reforms along with Euro zone crisis had muted the investment flow in India. As an immediate impact, the reform announcements have lifted sentiment within the domestic industry and renewed interest of foreign institutional investors in the Indian market.

The government has recently taken a number of reform initiatives such as opening the multi--brand retail and aviation sectors to FDI, hiking diesel prices and capping the number of subsidised LPG cylinders.

Besides, the government has also decided to raise the FDI cap in insurance from 26 to 49 per cent and allowing foreign investment in pension.

The index reveals that businesses are now turning optimistic about prospects for sales and profits.

Resultant optimism for volume of sales highest in six quarters, while optimism for net profits was highest in five quarters, Dun & Bradstreet said.

"Significant economic and investment cycle challenges persist in the economy. Therefore, revival of economic growth prospects is reliant on sharp pick-up in investment activity, corrective fiscal consolidation measures and continued momentum in reforms," Sampat added.

For calculating the composite BOI, each of the six parameters, net sales, net profits, selling prices, new orders, inventories and employee levels, is assigned a weight.

The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.