India Inc’s confidence takes a beating

Despite a record profit growth in Q1 2006, this is by far the worst outlook—as per industry chamber Ficci’s quarterly business confidence survey—in the past five quarters.

For the next six months, the growth outlook dropped from ‘significantly optimistic’ to ‘moderately optimistic’ in all operational parameters like sales, profits, investments, employment and exports. Overall business confidence has gone down drastically from a high of 85% in the previous quarter to 58% in this quarter.

‘‘The survey sounds a warning bell for the future even as a majority of the respondents remain optimistic. The outlook is not negative but there is uncertainty regarding oil price and interest rates,’’ said Ficci Secretary General Amit Mitra.

Though a majority 60% of the respondents were satisfied with the current performance of their industry sectors, the number has dipped as in the previous survey 77% of the respondents were satisfied with the growth levels.

For the coming six months, the industry outlook on sales has dipped with 70% of the respondents expecting higher or much higher sales (76% in the last survey). The biggest decline in confidence has come for exports with the confidence index plunging to an all-time low of 25. The index for the previous quarter stood at 62 while the index for the corresponding quarter in the last fiscal was 27.

‘‘The decline in confidence in export potential essentially is an indication that demand may be on a decline because of the price increases. The seasonal nature of exports could also be one of the reasons for the decline’’ Mitra said.

While sales, profits and employment indices have come down, investment index has fallen from last quarter’s 61 to 45 and the chamber squarely blamed interest rates. ‘‘Industry is apprehensive about the cost of borrowing and calculations are going haywire and projects rethought. The time is clearly not ripe for interest rate to harden further,’’ Mitra added.

A similar slide was visible in the confidence levels of small scale industries where only 53% respondents were confident of achieving a stable growth compared to 63% a year...