Business confidence rises, but future scares India Inc.

March 23rd, 2009 - 7:23 pm ICT by IANS  

New Delhi, March 23 (IANS) While overall business confidence has improved this fiscal, corporates are not confident about the future, says the latest business confidence survey released Monday by the Federation of Indian Chambers of Commerce and Industry (FICCI).
The FICCI Business Confidence Survey for the third quarter of 2008-09 said 64 percent of the 384 respondent companies - with turnover ranging from Rs.1 crore to Rs.33,000 crore - felt overall economic conditions have worsened between April and September 2008, down 22 percentage points compared to the previous survey.

However, about 55 percent of companies said their industrial performance worsened in this period, as compared to 81 percent earlier.

The overall Business Confidence Index for the quarter moved up to 44 from 37.8 in the previous quarter.

While this was heartening, FICCI said “it is now up to the government and RBI (Reserve bank of India) to expeditiously implement all the policies announced as well as inject further stimulus dosages”.

Said FICCI president Harsh Pati Singhania: “This would strongly aid the growth process and boost business confidence.”

But while participants admitted the current situation had improved somewhat, they said they were not too confident about the future, and that the export situation continued to remain bleak.

Among those surveyed, just 17 percent foresaw an increase in exports in the next six months, while 59 percent expected exports to fall.

At the same time, nearly 35 percent of respondents expected their performance to improve in the next two quarters.

Also, fewer companies complained about the banking sector compared to three months ago.

Close to 70 percent of the companies polled said that following RBI measures, they could source funds from banks as per requirements. About 63 percent said borrowing cost had come down over the last six months.

In addition to weak market demand, rising cost of raw materials once again emerged as an area of concern: the proportion of companies hit by rising raw material cost went up up from 30 percent in the last round to 45 percent.

While a cut in interest rates by the banks was an encouraging development, corporate India felt it was still very high, with almost 52 percent of companies saying they were reconsidering project investments due to the prevailing interest rate structure.

The survey also showed that one of five companies surveyed had approached banks for restructuring of term loans, with about only 50 percent getting a favourable response.

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