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India Inc braves drought fury

New Delhi, Dec. 13: India Inc expects industrial growth to remain robust in the second half of this fiscal despite a weak monsoon, according to CII’s Business Outlook Survey released here today.

The bi-annual survey—the 58th in the series—says 51 per cent of the respondents expect general business prospects to improve over the next six months. While 41 per cent felt that the same trend would continue, 4 per cent reckoned that the situation would actually worsen. A sectoral analysis reveals that the capital goods and intermediate goods sector would exhibit higher growth.

The interesting nugget thrown up by the survey is that companies are ready to put their money where their mouth is. Consequently, 54 per cent say they are looking at fresh capital investments in the existing business units. Fresh investment would largely be fed by the expectations of a pick-up in both domestic and international demand.

However, a caveat is in order: most of the investments are expected to be capital intensive as a majority of the respondents—57 per cent—say the level of employment is expected to remain constant over the next six months.

They are also upbeat on the economy: 50 per cent of the respondents pegged overall growth of the economy for 2002-03 at between 4.5-5 per cent. Another 46 per cent felt that growth would remain between 5-6 per cent. Just 6 per cent of the respondents were die-hard optimists, predicting an economic growth of over 6 per cent this year.

The survey noted that reforms would play a critical role in determining the growth rate of the economy with respondents saying that poor domestic economic conditions and policies would be a significant deterrent to achieving higher output levels.

The survey has revealed that the lack of orders in the past six months and the prevailing global and domestic economic and political scenario have been the primary factors limiting output. On an index of one to six, where one is the most limiting and six is the least limiting factor, the average rating received by ‘lack of orders’ and ‘domestic economic and political scenario’ are 2.8 and 2.7 respectively’ indicating them to be the most limiting factors.

On the infrastructure front, power continues to be the most vexing problem for industry in terms of infrastructure bottlenecks. On an index of one to six, it has received a low average rating of 1.8. The high rate of interest is the most significant factor impeding the easy access to finance according to the survey. On a six-point index it has received an average rating of 3.

Reluctance exhibited by the banks to lend, limited access to global capital markets, procedural hassles and subdued equity and money markets are other factors impeding the easy access to finance, the respondents felt.

The Business Outlook survey covered all industry sectors, including small, medium and large enterprises from different regions. The survey covered responses from 153 member companies across a spectrum of industry groups both in the public and private sectors.

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