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India Inc's confidence at 7-year low, says Ficci survey

BS Reporter in New Delhi | January 12, 2009 12:29 IST

The ongoing global economic downturn has sunk the India Inc's business confidence to a seven-year low because of deterioration in the economic environment, according to a survey by the industry chamber, Federation of Indian Chambers of Commerce and Industry.

The Ficci Survey for the second quarter of 2008-09, which was carried out during November and December 2008, revealed 52 per cent of companies feel that the overall economic conditions would weaken further in the coming six months.

Further nearly 90 per cent of the 412 companies surveyed in the report feel that the economic situation has deteriorated over the last six months.

The value of the 'current conditions index' has witnessed a continuous decline over the past several quarters and for the first time since the inception of the Ficci Business Confidence survey in 2002 it has fallen into the 'significantly pessimistic' zone, which is less than 30 points in a scale of 1-100.

With expectations with regard to performance at the economy, industry and firm level also taking a significant beating, the Expectations Index has also fallen from its value of 55.9 in the last survey to 44.3 in the present survey.

With significant deterioration seen in both the Current Condition Index and the Expectation Index, the overall business confidence index has also plunged to an all-time low.

The overall business confidence index has dipped quite significantly from 52.5 in the last survey to 37.8 in the present survey.

Companies participating in this survey had turnover ranging from Rs 1 crore (Rs 10 million) to Rs 50,000 crore (Rs 500 billion) and these were from various sectors like textiles, real estate, cement, oil and gas, jute, leather, chemicals and fertilisers, auto and auto components, banking, food processing, electrical equipment and machinery, gems and jewellery etc.

The survey shows that there is a gap between the Reserve Bank of India's [Get Quote] base rates and market lending rates of banks to corporate. As a result of which easing of monetary policy, as part of stimulus package, has not become effective.

Around 81 per cent of the companies have reported that their current industry performance is weaker as compared to the situation six month back.

Going ahead, things are likely to worsen as close to 50 per cent of the companies have reported that their industry performance would weaken in the coming two quarters.

Near term prospects for all the key business parameters - sales, profits, investments, selling price, exports and employment- look very bleak.

Since most of India's leading destinations are in recession, exporters are having a tough time with just 13 per cent of the participating companies expecting an improvement in their export performance over the next six months and nearly 57 per cent expecting exports to decline.

Companies have already started facing cancellation of orders in the export market and that price competition from other countries (particularly China) is pinching them hard.

With exporters facing cancellation of orders, and a huge majority of the corporates putting brakes on fresh hiring of hands and bank loans still hard to come by, there is a sense of gloom in corporate boardrooms.

And with a bleak future staring them in the face, corporate are demanding tax cuts to boost demand, says the Ficci survey.

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