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New Delhi: Private sector capital expenditure (capex), a key driver of economic growth and job creation, likely improved in the April-September quarter (Q2) when compared with the previous six months, aided by improvement in domestic demand, Confederation of Indian Industry (CII) said on Sunday.
As per an industry survey conducted by CII, around 59 per cent of the respondents anticipate improvement in the private capex cycle during the first half of the current fiscal year (2024-25) as compared to the second half of 2023-24.
The data indicates a significant improvement in capital investments by India Inc in Q2 after a lull in April-June period due to elections. “The upbeat prognosis on private investment is attributable to an improvement in domestic demand,” CII said in its Business Outlook Survey report.
“The latter got mirrored in the survey result which highlighted that more than half of the respondents anticipate sales and count of new orders in their companies to increase in the July-September quarter,” it said.
Nearly half of the respondents (46 per cent) feel that the capacity utilisation levels in their companies would range between 75-100 per cent during Q2, higher than the April-June quarter. Utilisation in the range of 75-80% is a healthy sign and normally leads to fresh investments.
The survey was conducted in September, covering more than 200 firms of varying sizes and across all industry sectors and regions. As per the survey, the CII Business Confidence Index increased to 68.2 in the July-September quarter, as compared to 67.3 in April-June. In Q2 2023, it stood at 67.1.
The survey respondents cited factors such as improvement in consumption, especially rural demand, steady progress in monsoon, continued emphasis on reforms and fresh sightings in private investment as the key reasons which will drive growth in the current financial year.
In tandem with the improvement seen in the business prospects, industry likely responded positively on hiring. Almost half of the respondents anticipate an improvement in the hiring situation in their companies during the second quarter.
Given the lingering uncertainty in the global environment, a larger proportion of the respondents (40 per cent) felt that there would be no change in their international investment plans in the quarter ending September 2024, while only 19% expect an increase.
On the domestic investment front, 41 per cent of the respondents said it will increase in the July-September quarter when compared with the previous quarter, while almost a similar proportion (40 per cent) foresees no change.
On monetary policy, more than a quarter of the industry leaders who participated in the survey expect the Reserve Bank of India (RBI) to cut its key policy interest rates by the end of the current fiscal. Around 34 per cent of the respondents anticipate RBI to begin its rate cutting cycle in the third quarter of the current financial year, while another 31 per cent of them expect the rate cut to start in January-March 2025 period.
The RBI’s Monetary Policy Committee is scheduled to meet October 7-9, where it is widely expected to maintain a status quo. The next bi-monthly meeting is scheduled in December. The RBI has kept the key policy interest rates unchanged since February 2023.