Majority expect economy to slow down, but are satisfied with Modi govt's performance.
An overwhelming majority of Indian chief executive officers think the economy would slow down in 2017 due to demonetisation of high value currency notes, which has hit sales of most sectors, including automobiles, cement, real estate, construction, hotels & tourism, and consumer products.
At the same time, CEOs are backing the Narendra Modi government, with 84% of those polled saying they are satisfied with his government's performance, especially rolling out tax reforms such as goods and services tax (GST).
A poll of 25 CEOs conducted across top Indian cities shows CEOs are expecting the Budget, to be announced early next month, would take note of the slowing economy and announce incentives such as lower corporate and personal tax.
"After demonetisation, a renewed thrust on infrastructure development projects -- which sets the wheels of the economy in motion, with or without private sector participation -- is anticipated," said Neeraj Kanwar, managing director, Apollo Tyres.
The corporate sector has already taken production cuts, conducted inventory management and reduced staff to meet the challenge of demonetisation.
The negative impact would continue for a few more quarters, CEOs said.
60% of CEOs said irrespective of a slowing economy, they would invest more, while some said the investments would be in capital expenditure on existing projects.
However, more than half of the respondents expect their growth plans to be hit in 2017 owing to demonetisation.
The negative impact would be seen on the stock markets, as almost 48% of CEOs polled expect the BSE Sensex to cross 30,000 by December 2017, while 36% said it would not.
The rest were not so sure about the prospects of the Sensex. The BSE Sensex closed two% lower in 2016 at 26,626 points.
88% of CEOs polled expect interest rates to fall in the new year, with banks flush with funds, thanks to demonetisation and slowing credit to the corporate sector.
They expect 75 to 100 basis points cut in interest rates this year that would come handy for launching new projects, if any.
In fact, 64% of CEOs said they could see changes on the ground, in terms of economic activity.
They expect the spending on new roads, railways and infrastructure to increase.
This would, in turn, help generate demand for private companies.
"India would continue to grow in terms of steel demand and consumption. However, the global overcapacity situation, significantly high coking coal prices and infrastructure bottlenecks would keep challenging the domestic steel industry. We hope the government's focus on infrastructure will help grow the demand further," said T V Narendran, managing director, Tata Steel.
The GST roll-out would be another booster for the economy, with 52% of CEOs expecting the landmark tax reform to become a reality by the middle of next year, while 28% of CEOs expect it to get delayed further.
"If there is an agreement on dual control, GST laws can be passed in the Budget session. However, April 1, as the date of GST implementation, is virtually ruled out, which, I think, is good news for both the industry as well as the government," said Pratik Jain, partner and leader (indirect tax), PwC India.
When asked whether the government and judiciary relations are under stress, 52% of CEOs agreed the relations are not good, while 36% said they were not aware of any such tension between the two. Only 12% of CEOs said the relations between the two are good.
Dev Chatterjee with T E Narasimhan, Aditi Divekar, Arnab Dutta, Ajay Modi, Nivedita Mookerji, Shreya Jai, Ram Prasad Sahu, Sheetal Agarwal and Ishita Ayan Dutt.
IMAGE: Finance Minister Arun Jaitley.
© 2024 Rediff.com -