India Inc. alarmed over worsening economic conditions

June 29th, 2008 - 12:34 pm ICT by IANS  

New Delhi, June 29 (IANS) India’s corporate sector is nervous about spiralling inflation that hit a 14-year high of 11.42 percent in the week ended June 14, but feels there could be moderate recovery in the medium term, said a survey by an industry lobby. The latest quarterly business confidence survey by the Federation of Indian Chambers of Commerce and Industry (Ficci), said 64 percent of the 413 companies questioned felt current economic conditions were the worst in the last six months.

In fact, 32 percent felt economic conditions would deteriorate further in the next six months.

The Expectations Index reflected some hope, with 37 percent of the respondents saying some recovery could take place in the medium term, particularly firm level performance.

At the same time, the survey’s Current Conditions Index was at its lowest following moderation in economic growth, rise in inflation and increasing input costs.

“While the situation may improve somewhat in the near future, we will still fall short of the strong performance that was witnessed till about a year ago,” the survey report said.

Any immediate hike in interest rates was bound to make the pressure insurmountable, it added.

“If the industry is saddled with further interest rate hikes then the present phase of ‘nervous optimism’ may not last long,” the report warned.

Forty-four percent of companies said they were reeling under the impact of rising interest rates and input costs, forcing them to raise prices.

With the RBI further tightening its monetary policy, interest rates have started hardening, which was bound to impact the country’s economic growth, they said. Rising crude oil and commodity prices globally have added to their anxiety.

The survey predicted that the manufacturing sector would continue to suffer through the year.

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