Investment prospects remain subdued: Survey

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While the business outlook for the next two quarters has seen an improvement on parameters such as sales, exports and employment, the overall sentiment among businessmen remains subdued on investment prospects and an improvement in profit levels, according to a survey.

About 35 per cent of the respondents in the FICCI Business Confidence Survey for June said that they expected higher investments over the period April-September 2016, compared to 41 per cent in the previous survey.

Unutilised capacity

“The companies remain cautious about undertaking fresh investments and about 46% respondents anticipated no change in investment levels,” the survey showed.

About 58 per cent of the participating companies said that they foresee higher sales over the next six months.

“The expected pickup in sales despite investment intentions remaining subdued indicates companies looking at rolling out unutilised capacity,” the survey said. “About 54 per cent of the participants in the current survey reported a capacity utilization of more than 75 per cent; in the last round the corresponding figure was 30 per cent.”

The expectation of higher capacity utilisation does not translate to an expectation of a pickup in demand, according to the survey. Weak international and domestic demand has had a major detrimental effect on industrial output, and the business community expects this to continue in the future. About 64 per cent of the respondents said that the demand situation was worrisome.