| Fortune favours
New Delhi, Jan. 2: India Inc is brimming with confidence at the start of 2005: it is betting that the growth in the economy will be robust this year though it is equally sure that inflation will ride high.
A snap poll of chief executives conducted by the Confederation of Indian Industry (CII) says 57.5 per cent of the CEOs interviewed expect the year 2004-05 to close with a GDP growth of 6 to 6.5 per cent.
The study says 31.8 per cent of the respondents felt that the growth rate will hover between 6 and 7 per cent.
In the next financial year (2005-06), 26.5 per cent of the respondents felt that the GDP growth rate would be between 6 and 6.5 per cent and 37.5 per cent respondents expected it to be between 6 and 7 per cent.
Inflation is widely expected to remain high: nearly 31.42 per cent of the respondents felt that the rate of inflation will range between 7 and 8 per cent.
Another 38.57 per cent of the respondents said it could vary between 6 and 7 cent in 2005-06.
The Reserve Bank of India has already reduced the growth forecasts for 2004-05 from the 6.5 to 7 per cent range announced earlier to the 6 to 6.5 per cent.
Further, the central bank has also raised the inflation rate projections from 5 per cent to 6.5 per cent for 2004-05.
Last month, the government further scaled back its GDP growth forecast for 2004-05 to around 6 per cent. After the strong 7.4 per cent growth in the first quarter (April to June), the economy has stuttered in the second quarter with the rate of growth put at just 6.6 per cent.
In the last two quarters, the manufacturing and service sectors will have to show a smart performance if the GDP growth this year has to keep pace with the forecast, especially because growth in the agri sector is down to a piffle after the weak monsoon this year.
Corporate honchos feel Union finance minister P. Chidambaram will be able to keep the government's finances in order.
An overwhelming 81 per cent of the respondents felt that the fiscal deficit would be capped at less than 4.4 per cent in 2004-05. Chidambaram has targeted a fiscal deficit of Rs 137,407 crore (or 4.4 per cent of GDP) in his budget estimates for 2004-05.
Corporate tax remains an important issue with the Indian industry. While 54 per cent of the respondents expected corporate tax to remain unchanged at 35 per cent, 46 per cent expected it to reduce to 30 per cent.
In the last Union budget, the government had brought down the most commonly prevailing customs duty to 20 per cent.
So, 57 per cent of the chief executives do not expect any reduction in customs duty in the budget for 2005-06.
Nevertheless, the remaining 43 per cent of the respondents were highly optimistic and expected that the customs duty would come down to 15 per cent.
As for their own performance, 38 per cent of the chief executives expected sales growth to be between 10 and 20 per cent and another 38 per cent expected it to be between 20 and 30 per cent.
Nearly 27.5 per cent of the respondents expected profit growth between 10 and 20 per cent. Another 17.24 per cent expected it to be between 30 and 40 per cent.
A very optimistic 13.8 per cent of the respondents predicted that it would be between 40 and 50 per cent during the current financial year.