New Delhi, Jun 29 (UNI) India Inc looks at the future with nervous optimism with majority of companies feeling that conditions in the last six months have worsened as compared to the period before, a FICCI Business Confidence survey here today said.
Industry is keeping its fingers crossed for a recovery in the medium term. This is on account of runaway inflation resulting in rising input costs which has affected the absorptive capacity of the companies.
The survey brings out that any further hike in interest rates would make the economic environment extremely difficult and perhaps insurmountable.
The survey, which drew responses from 413 companies having turnover ranging from Rs one crore to Rs 1,39,000 crore, notes the economic trends may have reached their worst levels and from now onwards one can expect some corrections.
Performance at the economy, industry and at the firm level has further weakened, says the survey, adding that the growth momentum is losing steam.
According to the survey, the current conditions index is at its lowest because of moderation in growth, rise in inflation and rise in input cost.
However, the expectations index has shown a marginal rise and the industry sees recovery in the medium term.
The overall business confidence index, therefore, has not seen any lateral movement and maintained its level as seen in the previous survey.
The survey also shows that the pressure on industry due to rising interest and input costs is insurmountable and thus companies are being forced to revise prices upwards. Hence,manufacturing inflation will go up in the months ahead and it would be a persistent trend throughout this year.
The FICCI, in the light of these findings, suggests that the authorities take some measures to bolster the change in perception amongst members of India Inc. If the industry is saddled with further interest rate hikes, then the present phase of 'nervousoptimism' may not last long.
The spiralling inflation rate since the beginning of this year has clouded the economic environment. With the RBI further tightening the monetary policy stance, interest rates have started hardening and this is bound to impact the country's economic growth.
Besides these domestic developments, global factors such as rising crude oil and commodity prices also continue to remain a cause of deep concern.
As many as 64 per cent respondents said current economic conditions are 'moderately to substantially worse' vis-à-vis the last six months.
In terms of expectations for overall economic conditions in the coming six months, 37 per cent of the companies said the economic conditions are likely to improve in the near term, while 32 per cent feel the opposite.
The assessment for current industry performance also shows further moderation, with nearly 38 per cent companies, saying that their industry performance has deteriorated over the last six months. Regarding, expected industry performance in the coming six months, nearly 44 per cent feel that performance is likely to improve.
Sector wise analysis reveals that while the trend of weakening current performance with regard to the heavy industry and the light industry has further accentuated, the services sector is also showing signs of moderation.
With regard to performance over the next six months, while the outlook in the case of the light industry has improved appreciably, a sizable proportion of respondents from the heavy industry too have indicated likely improvement.
Responses to operational parameters show that while the outlook for investments, sales and employment in the next six months has moderated, there has been a marginal improvement in the outlook for exports.
Although the depreciation of the rupee vs the US dollar has eased the situation on the export front somewhat, companies maintain that the lingering effect of the appreciation of the rupee seen last year still continues.
Respondents to the survey were largely from sectors such as cement, pharmaceuticals, textiles and apparel, leather, FMCG and heavy equipment.
Industry is keeping its fingers crossed for a recovery in the medium term. This is on account of runaway inflation resulting in rising input costs which has affected the absorptive capacity of the companies.
The survey brings out that any further hike in interest rates would make the economic environment extremely difficult and perhaps insurmountable.
The survey, which drew responses from 413 companies having turnover ranging from Rs one crore to Rs 1,39,000 crore, notes the economic trends may have reached their worst levels and from now onwards one can expect some corrections.
Performance at the economy, industry and at the firm level has further weakened, says the survey, adding that the growth momentum is losing steam.
According to the survey, the current conditions index is at its lowest because of moderation in growth, rise in inflation and rise in input cost.
However, the expectations index has shown a marginal rise and the industry sees recovery in the medium term.
The overall business confidence index, therefore, has not seen any lateral movement and maintained its level as seen in the previous survey.
The survey also shows that the pressure on industry due to rising interest and input costs is insurmountable and thus companies are being forced to revise prices upwards. Hence,manufacturing inflation will go up in the months ahead and it would be a persistent trend throughout this year.
The FICCI, in the light of these findings, suggests that the authorities take some measures to bolster the change in perception amongst members of India Inc. If the industry is saddled with further interest rate hikes, then the present phase of 'nervousoptimism' may not last long.
The spiralling inflation rate since the beginning of this year has clouded the economic environment. With the RBI further tightening the monetary policy stance, interest rates have started hardening and this is bound to impact the country's economic growth.
Besides these domestic developments, global factors such as rising crude oil and commodity prices also continue to remain a cause of deep concern.
As many as 64 per cent respondents said current economic conditions are 'moderately to substantially worse' vis-à-vis the last six months.
In terms of expectations for overall economic conditions in the coming six months, 37 per cent of the companies said the economic conditions are likely to improve in the near term, while 32 per cent feel the opposite.
The assessment for current industry performance also shows further moderation, with nearly 38 per cent companies, saying that their industry performance has deteriorated over the last six months. Regarding, expected industry performance in the coming six months, nearly 44 per cent feel that performance is likely to improve.
Sector wise analysis reveals that while the trend of weakening current performance with regard to the heavy industry and the light industry has further accentuated, the services sector is also showing signs of moderation.
With regard to performance over the next six months, while the outlook in the case of the light industry has improved appreciably, a sizable proportion of respondents from the heavy industry too have indicated likely improvement.
Responses to operational parameters show that while the outlook for investments, sales and employment in the next six months has moderated, there has been a marginal improvement in the outlook for exports.
Although the depreciation of the rupee vs the US dollar has eased the situation on the export front somewhat, companies maintain that the lingering effect of the appreciation of the rupee seen last year still continues.
Respondents to the survey were largely from sectors such as cement, pharmaceuticals, textiles and apparel, leather, FMCG and heavy equipment.
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