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Input costs, lack of reforms hit India Inc.
business confidence
Sunday August 12, 2012 06:35:32 PM,
IANS
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New Delhi: Most in
India Inc. expect stagnancy or decline in their business
activities in July-September period due to high cost of
borrowings, unfavourable macro-economic condition and the
government's inability to push forward the reforms process, a
survey revealed.
According to a business outlook survey conducted by the
Confederation of Indian Industry (CII), majority of business
houses witnessed stagnancy in their overall sales, new orders,
value of production, inventory levels and employment in the first
quarter of 2012-13 financial year.
For the second quarter of the current financial year, the business
confidence has declined further, indicating that the situation is
likely to worsen further.
CII Business Confidence Index for July-September 2012 fell by 3.7
points to 51.3, after rising to 55, in April-June 2012 from 52.9
in the previous quarter.
"The falling index value is reflective of low business sentiments
that has been prevailing for the last few quarters," Chandrajit
Banerjee, director general, CII, said in a report.
The survey revealed that stagnancy in reforms is the top concern
of most firms, followed by slackening consumer demand and high
interest rates.
Rising input costs continue to be a major worry for firms.
Majority of the firms recorded an increase in raw material costs,
electricity and fuel cost and cost of wages and salaries during
April-June period as compared to the previous quarter.
Expectations for the quarter ending September 2012 show that a
majority of firms still expect these costs to increase though the
proportion of respondents expecting an increase is lower than in
the first quarter.
Almost all firms reported either an increase or no change in the
cost of credit and a majority continue to expect no change in the
second quarter.
Reflecting the grim domestic policy scenario, investment
sentiments have weakened considerably.
However, on a positive note, the survey showed that 56.1 percent
of the respondents expect domestic investments of their companies
to rise in the second-quarter of 2012-13 compared to the first
quarter, while 39.5 percent expect it to show a decline or no
change.
Over 42 percent expect international investments to show a decline
or no change in July-September quarter, while 34.7 percent of
respondents expect it to record any increase.
Majority 88.9 percent of the respondents said that infrastructural
bottlenecks and lack of policy reforms were responsible for
holding back domestic investments.
The survey also showed that in the first quarter of 2012-13, 42.8
percent firms had capacity utilisation between 75-100 percent.
In a sign of improving capacity utilisation, a higher percentage
of 57.2 percent expect it to remain above 75 percent in the
second-quarter of the current fiscal.
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