The Telegraph
Since 1st March, 1999
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Slump squeezes out investment

New Delhi, Oct. 27: Corporate India is going modest with its investment plans, thanks to a weak demand and low capacity utilisation. And despite economists forecasting an early end to the bleak days, cautious industrialists would prefer to wait and watch, putting their investment plans on hold.

A survey by the Federation of Indian Chambers of Commerce and Industry (Ficci), covering 426 respondents from a wide range of sectors including engineering, chemicals, foods and beverages, pharmaceuticals, information technology, automobiles and FMCG, shows that a mere 28 per cent are considering any kind of investment—be it modernisation, brownfield or greenfield. A similar survey conducted six months back had shown almost the same results—26 per cent were then thinking of investments.

According to the second quarter business confidence survey presented by Ficci, the coming budget should focus on stimulating demand through a multiplier effect, reduce taxes and put more purchasing power in the hands of the masses and create credit potential for various sectors of the industry.

Almost 62 per cent of respondents felt the poor demand was adversely affecting their performance, and approximately half the respondents were faced with more than 25 per cent of their capacity lying idle.

Other issues troubling India Inc, the study says, include hardening of oil prices in response to the US-Iraq stand-off and the general slowdown in the pace of second generation reforms. Almost 90 per cent of respondents feel slow reforms will have a high to medium impact on the economy.

Approximately 68 per cent respondents see high to very high sales in the next six months due to the coming winter and policy expectations. Last time around, 75 per cent respondents expected higher sales. Nearly 53 per cent expect high profits over the next six months. However, almost 59 per cent respondents expected the same in the last six months.

Further, 42 per cent respondents expect higher to much higher exports for the coming six months. This was as high as 59 per cent in the last BCS survey conducted for the first quarter. This obviously implies a fall in expectations and goes against the attempt by the government to paint a rosy picture of the economy.

The survey also shows that a mere 17 per cent have chalked out plans for recruiting more people during the next six months, last quarter this figure was however lower at 15 per cent.

Different industries indicate a consistent pattern of growth and optimism on macroeconomic conditions. Approximately 52 per cent of those quizzed expect moderate economic conditions to prevail in the coming six months, compared with 66 per cent in the last survey. As high as 59 per cent believe their respective sectors are performing moderately better than the last six months compared with 61 per cent in the last survey.

All three indices—current conditions at 65 per cent (67 per cent earlier), expectation at 71.6 per cent (73 per cent) and overall business confidence at 69.4 per cent (71 per cent) were down.

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