Expectations of more than 8 percent GDP growth and higher exports this financial year raised confidence among Indian businesses for first half to September 2006, a survey by the Confederation of Indian Industry (CII) showed.
The CII survey of 254 companies released on Sunday showed the main business confidence index rose to 69.3 points for April-September 2006 from the September-March 2005/06 level of 67.2 points.
A score above 50 indicates "positive confidence" while a score above 75 would indicate "strong positive confidence", the industry lobby group said in a statement. The higher confidence level revealed in the 65th survey of the country's largest industry lobby group, published every six months, comes despite expectations of an increase in input costs that may put pressure on profit margins.
"Prices of raw materials have increased in the past six months. The prices are expected to increase in the next six months also. There is a likelihood of pressure on margins especially in (the) manufacturing sector," the CII survey said.
Prices of key industrial inputs like furnace oil and metal prices have surged in the past few months, but the Indian government has held back from raising retail fuel prices.
The federal government is now discussing whether to raise fuel prices - or cut duties - to stem the losses of state-run oil firms.
The CII survey showed the expectations index, which reflects firms' outlook for the next six months, also increased to 70.8 points for April-September 2006, from 68.5 points in the previous half.
CII's current conditions index also increased to 66.3 points from 64.7 points as most respondents expect the Indian economy to grow by more than 8 percent in 2006/07.
The survey showed 88 percent of respondents willing to make additional investments during 2006/07. About 57 percent of them expects 75-100 percent capacity utilisation during first half of 2006/07.
Indian businessmen also expect higher exports although 83 percent of respondents complained of procedural delays that were raising transaction costs.