New Delhi, June 29: Industry is optimistic that the economy will overcome current inflationary pressures and do well in the medium term.

“In its assessment of the economic situation, corporate India said economic trends might have reached their worst levels but one can expect some improvement from now on,” the Federation of Indian Chambers of Commerce and Industry (Ficci) said in its fourth quarter business confidence survey.

The study stated that current economic conditions were worse than what they were six months back, adding that “the continuing rise in inflation and input costs have tested the absorptive capacity of companies and any immediate hike in interest rates is bound to make the pressure insurmountable”.

Expressing uncertainty over the current economic environment, 64 per cent of the industry representatives said conditions were “moderately to substantially worse” compared with the last six months.

The survey, which was conducted in May-June, drew responses from 413 companies having a turnover in the range of Rs 1 crore to Rs 1,39,000 crore and belonging to sectors such as cement, pharmaceuticals, textiles and apparel, leather, FMCG and heavy equipment.

The results of the survey showed that performance at the economy, industry and at the firm level had further weakened.

The current conditions index is at its lowest at 48 per cent because of moderation in growth, rise in inflation and an increase in input cost. The expectations index, however, has shown a marginal rise at 58.9 per cent against 55.7 per cent in the previous quarter.

“There is, therefore, a glimmer of hope and industry feels that some recovery will take place in the medium term. This is being seen particularly in the case of a firm-level performance. However, while the situation may improve somewhat in the near future, we will still fall short of the strong performance that was witnessed till about a year ago,” the study said.

In terms of expectations for the coming six months, results of the present survey are slightly better than the last.

About 37 per cent of the companies hoped that conditions would improve in the near term. However, 32 per cent still feel that the situation will deteriorate further.

Nearly 38 per cent of the companies witnessed a decline in performance over the last six months compared with 29 per cent in the last survey.

However, the outlook for a better performance in the next six months has marginally improved to nearly 44 per cent from 35 per cent in the previous study

The survey also showed that manufacturing inflation would go up in the months ahead and would be a persistent trend throughout 2008.