India Inc146;s confidence shaken

High inflationary pressures have succeeded in shaking corporate India8217;s confidence in economy and business.

High inflationary pressures have succeeded in shaking corporate India8217;s confidence in economy and business. A resounding 64 per cent of respondents to Federation of Indian Chamber of Commerce and Industry8217;s FICCI 8216;Business Confidence Survey Q4 2007-088217; have said that current economic conditions are 8216;moderately to substantially worse8217; compared to the last six months. This is much higher than the 50 per cent that voiced the same sentiments in the last FICCI survey.

In terms of current industry performance, too, there has been a pronounced moderation in the optimism voiced by companies. Only 28 per cent of companies said that their current industry performance is moderately to substantially better8217; over the last six months. The proportion citing weakening of their industry performance over the same period stood at 38 per cent.

8220;The Current Conditions Index is at its lowest level because of moderation in growth, rise in inflation and input costs,8221; FICCI said, adding that the pressure on industry on account of rising interest and input costs has breached the absorptive capacity for many companies that are now being compelled to pass on the price rise to customers. 8220;Manufacturing inflation will go up in the months ahead and it would be a persistent trend throughout 2008.8221; Manufacturing has a weightage of 63.75 per cent in the whole price index.

When asked about the current firm level performance, a discouraging 39 per cent of participating companies reported that their own current performance is 8216;moderately to substantially better8217; over the last six months. This represents a significant decline from the results obtained in the last survey wherein 52 percent of the respondents had reported likewise. Significantly, while only 15 per cent of the companies had reported a slowdown in firm level performance in the last survey, this figure has doubled to almost 31 per cent in the current survey.

Projections of sales, profits and investments have also been much more circumspect in the current survey. Around 53 percent of companies say they expect higher/much higher sales as against 58 percent in last quarter. Just 43 per cent see greater investments in the survey, as against 54 per cent in the last one. Employment rate too is expected to slow down, with 24 per cent expecting a spurt in employment compared to 28 per cent last quarter. With costs adding up, 40 per cent of respondents see a definite increase in prices as against 31 per cent last quarter.

While the Current Conditions Index has gone down, the Expectations Index has moved up, indicating nervous optimism8217; on the part of Indian corporates who feel that the worst is over. Around 37 per cent of companies have said that overall economic conditions could only get better, as against 30 per cent in the previous survey. AT the industry and firm level too, a similar sentiment has been echoed.

With the Current Conditions Index and Expectations Index moving in the opposite direction, the Overall Business Confidence Index value has stayed constant at 55.3 as seen in the previous survey.