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IACC
Launches
Indo-US Business
Confidence Index
For the first time
a live, sensitive
Business Confidence
Index, which reflects,
in numeric terms,
the macro and micro
economic activities,
between India and
US has been launched
by Indo American
Chamber Of Commerce
(IACC). The index
is called IACC-IMaCS
Indo - US Business
Confidence Index
(IIBCI).
The IIBCI is a barometer
of the prevailing
economic activities
(trade, investments,
business, industry,
services etc) measured
in terms of by Indo-US
bilateral trade,
FDI, FII investment
in each others country.
The business sentiment
is governed by the
overall economic
indicators, investment
climate, forward-looking
expectations and
perceptions of the
stakeholders in
the two countries.
The IIBCI is a composite
of six sub-indices/
Macro economic assesment
index, thrust sectors
group confidence
index, Firm Competetive
Index, Consumer
Confidence Index,
Firm Specific Financial
Performance Confidence
Index And Business
Perception Index.
“The IIBCI
will provide an
insight into various
entities in both
countries US and
India namely investors,
corporate, governments
and business leaders,
who seek an analysis
of the business
climate that govern
the Indo-US bilateral
economic relations,”
said Mr. Deepak
Pahwa, National
President, IACC.
The Index will be
updated twice every
year.
Indo-American Chamber
of Commerce (IACC)
has felt the need
for an Index that
reflects the level
of economic activity
between India and
the United States
and captures the
confidence of stakeholders
in Indo-US business
relationships. This
is in the context
of the enhanced
economic partnership
in recent years
between the two
countries in areas
such as business,
trade, investments,
industry, services,
and Government.
Accordingly, IACC
commissioned ICRA
Management Consulting
Services Limited
(IMaCS) to develop
such an index.
“IACC-IMaCS
Indo-US Business
Confidence Index
(IIBCI) is intended
to be a barometer
of the prevailing
economic activity
(symbolised by Indo-US
bilateral trade
and FDI/FII investment
flows into India)
and the business
sentiment governed
by the overall economic
indicators, investment
climate parameters,
forward-looking
expectations and
perceptions of the
stakeholders in
the two countries.
The IIBCI will provide
an insight into
various entities
in both countries
investors, corporates,
governments and
business leaders,
who seek an analysis
of the business
climate that governs
the Indo-US bilateral
economic relations,”
says Deepak Pahwa,
National President,
IACC.
The IIBCI is conceptualised
as a composite index
built on six underlying
sub-indices as depicted
in the graphic below:
Among others, the
IIBCI is targeted
towards the following
sections of users:
• IACC members
(both American and
Indian)
• IACC Members
and Potential Members
• Policy makers
in India and the
US Administrations
• Business
Media
• Consultants,
Analysts and investors
in India & US.
• Similar
Organizations like
AMCHAM and USIBC
• Apex Business
Organizations and
other Chambers and
Business Associations
• NGOs
• Tourism
Promotion Organizations
particularly business
travellers
• US investors
seeking to invest
in India by way
of FDI
• US Investors
seeking to invest
in India via the
FII route
•Business
organisations based
in the US/India
evaluating India
for trade or investments
• Industry
associations in
the US and in India
• Governments
of US and India
• Academia
and Economist with
an interest in Indo-US
relations
Study Upshot
The IIBCI, pre-calibrated
at 100 in 2003 (the
base year), has
shown a steady rise
over the past three
years to reach 219
in 2006, reflecting
the growing bilateral
trade and business
confidence between
India and US over
the period. Designed
as a composite index,
the IIBCI is an
aggregation of six
sub-indices that
measure the level
of economic, trade
and investment activities
between the two
countries over the
years. One of the
sub-indices, namely
the Business Perception
Index, measures
the sentiments and
qualitative perceptions
that the Indo-US
business and financial
community exhibit
on issues pertaining
to investment climate
and business outlook.
The BPI has been
computed only for
2006 as it is not
possible to do so
retrospectively.
Table below indicates
the movement of
the IIBCI (last
but one column)
and the underlying
sub-indices over
the past 10 years.
All the indices
are at 100 (by design)
in 2003 (the base
year). The IIBCI,
after a relatively
sluggish growth
in the late 1990s
and early part of
the current century
has grown rapidly
post 2002, in one
year spurting to
a high of 53%. A
blip in the growth
of the IIBCI (and
the sub-indices)
is observable in
2001 post the tragic
events on September
11, 2001.
The movement of
the IIBCI vis-a-vis
the preceeding years
are captured by
the variations in
the associated sub-indices
that pertain to
the developments
in bilateral merchandise
and services trade
(covering both imports
& exports),
confidence that
the investors and
businesses exert
upon Indian economy,
financial performances
of sampled US firms
operating out of
India, perception
on firm level competitiveness
and the general
income and spending
patterns as exhibited
by the private and
the Government sector.
Each of the aforesaid
aspects and their
relative performances
are embedded within
the movement of
the IIBCI and the
associated sub indices.
Key Observations:-
• The overall
IIBCI has increased
over the years,
though the rate
of increase has
varied over the
years
• For the
most recent two
years, the rate
of increase in confidence
has been about 20%
• The Macro-economic
Assessment and the
Financial Performance
sub-indices fared
better in 2006 (based
upon YoY growth)
vis a vis 2005 whereas
the Consumer Confidence
and Firm Competitiveness
sub-indices increased
at a lower rate.
• Merchandise
and services exports
to US increased
in 2006 vis a vis
2005. The merchandise
exports grew from
USD 18.81 billion
in 2005 to 21.83
billion in 2006
whereas the services
exports is estimated
to have grown from
USD 41.75 to 49.67
billion for the
corresponding period.
The rate of growth
has however shown
a slight deceleration
across major items
in FY 2005- 06 when
compared to that
in FY 2004-05 at
the disaggregate
level.
• Import of
services from US
did well in 2006
(growth of 22% vis
a vis the previous
year) whereas merchandise
imports growth rate
was about the same
• Overall
business perception
as exemplified from
the stakeholder
survey inputs seemed
positive in 2007.
However, respondents
stated their dissatisfaction
towards the statutory
and legislative
impediments to investors
and businesses operating
in India.
• Recent sentiment
pertaining to the
INR USD exchange
rate clearly showed
up in the perception
survey. Given the
fact that India
is a net exporter,
30% of the respondents
expressed apprehension
on the issue of
the appreciation
of the Rupee.
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