Business confidence up in Modi regime

Prime Minister Narendra Modi. Business confidence is up after the Prime Minister Narendra Modi

Prime Minister Narendra Modi. Business confidence is up after the Prime Minister Narendra Modi’s new government took office,

Business confidence is up after the Prime Minister Narendra Modi’s new government took office, according to the Business Outlook Survey by the Confederation of Indian Industry (CII).

“Indicating a sharp improvement in investors’ sentiments amidst heightened expectations that the new government means business along with some improvement in basic macro indicators, the CII Business Confidence Index (CII-BCI) for the April-June 2014 quarter has moved up to 53.7 from 49.9 in the previous quarter,” the CII said on Sunday.

The number 50 is the dividing line on the survey’s index between positive and weak business confidence.

Mr Modi took oath May 26 at the head of a BJP-led government.

The survey, based on responses from over 150 industry members distributed over large, medium, small and micro firms, and almost equally between manufacturing and services, exuded confidence about prospects of economic growth based on decline in price-rise and deficits, export recovery, buoyant foreign capital inflows and strengthening of the rupee.

“We expect the index to gather momentum in the coming days, riding on improved sentiments and business confidence,” the CII director general Chandrajit Banerjee said.

According to the survey, while growth is expected to pick up from 4.7 per cent in 2013-14 to between 5.5 and 6 per cent in fiscal 2015, wholesale price inflation is expected to moderate to between 5.5 and 6 per cent in the current fiscal.

The CII cited economic uncertainty, low GDP growth and high inflation as its priority concerns, highlighting the need for stepping up efforts to improve business sentiments and removing supply bottlenecks.

“We are pleased to see that the new government is already working in this direction and it is only a matter of time when fundamentals of the economy will start falling in place,” Mr. Banerjee said.

Reflecting upward trends in demand, the survey found most businesses have started experiencing a rise in capacity utilisation, which augurs well for a turnaround of the economy.

As much as 56 per cent of respondents expected sales and new orders to increase in the first quarter of 2014-15, which is much higher than the previous quarter where only 35 per cent of respondents expected a rise in sales.

Philips to spin off LED lights business

The electronics group Philips is gearing up to spin off its car lights and LED business that could be valued at up to €2bn.

The Dutch group, which has been reducing its consumer electrical business to focus on its healthcare division, said it will merge its Lumileds LED components and car lighting divisions into a separate group that could eventually be sold off.

The market for LED lights has been booming as the world switches from incandescent light bulbs to alternatives. But a price war has also hit profits of the big providers and splitting off the division allows it to be more nimble.

Philips, led by chief executive Frans van Houten who has been implementing a turnaround since he took over in April 2011, said Philips will explore “strategic options” to raise money from third party investors but that it will remain a shareholder and customer of the new company.

Options include listing the new group where Philips could become a minority shareholder. Mr van Houten said: “Guided by our long-term strategy, we continue to actively manage our portfolio of businesses.”

He said the Lumileds and car business, which is yet to be named, will be able to grow better and more quickly with outside investment “independently of Philips Lighting.” The separation will also mean Philips other businesses can compete for new contracts with businesses that had been previously been competitors in the LED market.

Lumileds, which makes high-powered LED lights, and its car lights division that counts BMW and Audi as customers, have annual sales of around €1.4bn. The merging of the two divisions will complete next year and is expected to cost Philips €30m in the second half of this year. The new group, which analysts estimate is valued at up to €2bn, will be led by Lumileds current chief executive Pierre-Yves Lesaicherre and the group will continue work with Philips on new innovations and research.

Mr van Houten has cut costs and streamlined the 123-year old business and last year sold its home entertainment business to Japan’s Funai Electric, which will make the products under licence. It previously sold off the TV business. The group has three divisions: lighting, consumer electricals and healthcare with the focus for growth on its healthcare business which includes medical equipment for radiology, cardiology, oncology specialists.