India Inc's investment spirit is down. A majority of leading CEOs expect domestic investments and money infusion abroad by Indian companies to grow by less than 10 per cent or to decline during 2012, in view of the current economic slowdown.
Around 66.7 per cent and 67.9 per cent of CEOs believe this about domestic investment and outbound investment by Indian companies, respectively, in a survey conducted by the Confederation of Indian Industry (CII).
A vast majority (over 80 per cent) felt the sluggishness in the Western world, growing uncertainty and risk averseness are likely to have a moderating impact on India's exports, foreign direct investment and foreign institutional investor inflows, and external commercial borrowing.
India's exports grew by just over 10 per cent in October against 30-80 per cent in earlier months. FDI inflows, were, however not as muted. As much as $19.14 billion came to India in the first six months of this financial year, up 74 per cent over $11 billion in the same period last year.
However, FII inflows are dismal. Till December 2 this calendar year, they had invested $4.6 billion, 88 per cent less than $39 billion in the corresponding period of last year.
"It is worrying to note that a majority
of CEOs have muted investment plans both in India and abroad, reflecting the difficult environment for investments," said CII Director General Chandrajit Banerjee.
Already, Gross Fixed Capital Formation (GFCF), a proxy for the investment rate, has showed a serious downtrend for the second quarter of this financial year at 7.06 per cent (year on year). It was 14 per cent in the first quarter.
In the first six months of 2011-12, investments for India, including FDI, stood at Rs 13.4 lakh crore, 77 per cent of what was attracted for last year. But, a majority of respondents felt the New Manufacturing Policy was likely to improve the investment environment.
The policy, that talks of large investment zones, bigger than even the Special Economic Zones, aims at increasing the share of the manufacturing sector from 16 per cent at present to 25 per cent over the next decade.
When asked to rate specific factors holding back domestic investments, the respondents rated land availability and cost of power, environmental clearances and high cost of capital as issues of high importance.
Issues such as transportation infrastructure, labour reforms and the taxation regime were also perceived as moderately important.
When asked whether India should contribute to the euro zone's bailout fund, 70.6 per cent of the respondents disagreed, while 23.5 per cent believed India should contribute.