According to the 88th Business Outlook Survey by the Confederation of Indian Industry (CII), six per cent growth in gross domestic product (GDP) is within the country's reach in the current fiscal.
"Indicating a sharp improvement for the second consecutive quarter, the CII Business Confidence Index (CII-BCI) for July-September quarter FY15 has shot up to 57.4, up from 53.7 in April-June quarter and 49.9 in January-March quarter this year. During the same quarter last fiscal, the index had touched the all-time low value of 45.7," the CII said in a release in the national capital Monday.
The number 50 is the dividing line on the survey's index between positive and weak business confidence.
"Thirty per cent respondents expected GDP to grow in a range of 5.5-6.0 per cent in FY15, which indicates that 6 per cent growth is within reach this year," it added.
The jump in business confidence for the second consecutive quarter as seen in the survey, based on responses from over 150 industry members distributed over large, medium, small and micro firms, is rooted in expectation of recovery in sales coupled with sharp decline in input costs.
"The determination shown by the new government at the Centre to provide an impetus to growth along with reviving the 'feel good' factor has sent the business confidence index soaring for the second quarter in a row," CII Director General Chandrajit Banerjee said.
With the revival in domestic and global demand, a majority (46 per cent) of the surveyed businesses were contemplating new investment in the July-September quarter, while only a minor 10 per cent expected contraction, CII said.
"This indicates that economic recovery is sustainable, provided we maintain the demand momentum, where the monetary stance by the Reserve Bank (RBI) will play a crucial role," it added.
Observing that the country is currently positioned to reach the Reserve Bank of India's inflation target of 6 per cent by January 2016, RBI Governor Raghuram Rajan last week decided to keep key policy rates unchanged. The central bank kept the lending rate, or the repo rate, unchanged at 8 per cent, while retaining the short-term borrowing, or reverse repo rate, at 7 per cent and the cash reserve ratio (CRR) at 4 per cent.
CII cited the slow pick up in global demand, high inflation and rising borrowing costs as the top three concerns of the respondents.
"While we can do little about addressing the global slowdown concern, all policy options must be explored to tackle the problem of inflation and high borrowing cost," it added.
Reflecting upward trends in demand, the survey found the businesses have started experiencing a rise in capacity utilisation, which augurs well for a turnaround of the economy.
A significant 77 per cent of the respondents expected their sales to increase in the July-September quarter, much higher than 50 per cent respondents in the previous quarter.
Moreover, 49 per cent of the respondents expected their export orders to increase in July-September quarter compared to 39 per cent respondents in the previous quarter.