Industry confidence is on the rise over optimism the economy may not be significantly impacted by the impending global recession.

The CII Business Confidence Index has shown its highest reading in almost two years to 67.6 in the October-December quarter, the industry chamber said.

“The BCI rebounded to its highest reading in almost two years of 67.6 in the October-December quarter from 62.2 in the previous quarter. The sharp improvement in the value of the index was buttressed by subsiding of concerns around the impending recession and its impact on the Indian economy,” the CII said in a release.

The index is based on the findings of a survey of over 120 firms of varying sizes and across all industry sectors and regions of the country.

An overwhelming 73 per cent of the respondents expect a moderate impact of the global slowdown on the economy.

The confidence stems from the fact that a significant majority of them (86 per cent) believe the government’s focus on infrastructure is the biggest positive for the economy, followed by the improvement in tax collections and good consumption recovery.

A majority of the respondents (70 per cent) feel the economy will expand in a range of 6.5 per cent to 7.5 per cent in the current fiscal from 8.7 per cent in the last fiscal — in line with the official estimate of 7 per cent.

Growth is expected to moderate further in the next year on global headwinds.

The CII said the RBI should not raise the interest rates any more to protect growth. Nearly half of the respondents (47 per cent) have indicated they have already started feeling the impact of the policy rate hikes by the RBI on the overall economic activity.

However, 90 per cent of the respondents said their company’s investment cycle will recover during the next fiscal.

The respondents are waiting for a recovery in the rural economy: about 60 per cent said a pick-up in rural consumption will take place in the next fiscal.

The profit outlook for the quarter has strengthened as nearly half of the respondents (47 per cent) foresee an increase in profit margins, despite the majority of them indicating high input costs.