Rising input costs a major worry, says industry lobby

February 22nd, 2011 - 7:46 pm ICT by IANS  

Pranab Mukherjee New Delhi, Feb 22 (IANS) The rising input costs and the possibility of high food inflation spilling into other sectors like manufacturing could lead to a slowdown in the industrial output in the next six months, said a survey released by an industry lobby Tuesday. “Buffeted by rising raw material and manpower costs and the threat of food inflation spilling over to the manufacturing sector, the confidence level of corporate India has slipped ahead of the Union Budget 2011-12,” according to a Business Confidence Survey (BCS) conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI).

“India Inc sees industrial growth slowing down in the next six months,” it added.

The survey reveals a fall in the overall business confidence index from 76.2 in the previous survey to 63.8.

Almost 90 percent of over 296 companies that participated in the survey said that rising cost of raw materials has affected their business performance. The firms also expect the build-up in food prices to spill over to the manufacturing sector.

Over 93 percent of the firms said that they are also facing demands for higher wages and this is complicating their cost structure further. The survey said that almost 25 percent of the firms expect their profit level to be lower in the next six months.

Nearly 53 percent of the companies also said that they are not able to hold the price line any further and would increase selling prices in the next six months.

Also, 53 percent of the firms said that successive hikes introduced by the Reserve Bank of India in the key monetary variables have started impacting industry’s performance as high lending rates by banks are having an impact on their operations.

The industry lobby also urged Finance Minister Pranab Mukherjee to continue stimulus measures and not raise excise duties in the upcoming budget to avoid a slowdown.

“There should be no further rollback of the stimulus measures. Excise rates in particular should not be raised,” FICCI said.

FICCI also expects the government to provide some additional relief to individuals who are facing the brunt of inflation apart from modulating the taxation structure on oil products to limit increase in fuel prices.

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