‘India Inc will stay confident despite rising inflation’

CHENNAI: Even as food inflation is zooming sky high at 18.32%, Indian business environment will continue to improve and optimism is expected to persist into 2011, says global financial consultancy firm Dun & Bradstreet.

The Composite Business Optimism Index formulated by Dun & Bradstreet (D&B ) continued its upward trend and stood at a three-year high of 171.2 for the first quarter of 2011, an increase of 24.5% YoY, indicating a positive outlook.

“India Inc’s optimism continues to surge with the index scaling to a three-year high. The buoyant sentiment regarding future demand conditions, reflected in the 14-quarter high resultant optimisms for both volumes of sales and new orders, imparts confidence,” noted Dun & Bradstreet India president and CEO Kaushal Sampat.

“Given that mounting inflationary pressures continue to be a significant downside risk to growth, how inflation pans out in the ensuing months would play an important role in shaping business sentiment in the near future,” he said.

He also added that RBI’s monetary policy stance in the next policy review and the government’s proposals for the corporate sector in the forthcoming Budget will be key to determining business expectations.

The responses of the survey indicated that five out of the six optimism indices — volume of sales, net profits, new orders , selling prices and employee levels registered an increase when compared to the previous quarter. Inventory sales were the only one index that declined marginally when compared to the fourth quarter of 2010.
The survey hinted that domestic demand conditions will witness further improvement, with 91% respondents expecting their volume of sales to increase in the first quarter of 2011. It also said profit expectations for the forthcoming quarter have also improved substantially with almost 82% of the aggregate respondents expecting their net profits to increase.

While around 48% of the respondents expect the selling price of their products to increase during Q1 2011, as many as 91% of them expect their order book position to improve during the same period.