Survey shows pessimism on operating parameters and overall economy’s prospects has risen sharply; companies want measures to revive growth
A survey by the Federation of Indian Chambers of Commerce and Industry (Ficci) says business is at a 17-quarter low, reminiscent of the financial meltdown days of 2008-09. 
Its latest Business Confidence Survey, conducted during July and August, show significant moderation in the performance of companies vis-à-vis the previous six months. The Overall Business Confidence Index declined to 49 in the latest survey, compared to 57.4 during the previous quarter; it has slid for four quarters.
The outlook on sales, profits and exports remained subdued, with a majority of respondents anticipating no change from the current levels in the coming six months. Respondents also said the sharp fall in the rupee had affected their input costs, lowering their profitability.
“The participating companies were not optimistic about near-term performance either. A discernible increase was seen in the proportion of respondents reporting a ‘moderately to substantially worse’ performance at the economy and industry level, going ahead,” the survey said. As many as 67 per cent of the participating companies indicated they did not intend any fresh hiring in the near term and their workforce was expected to remain at the current levels.
The proportion of respondents citing an increase in investment levels over the next two quarters declined to 21 per cent in the present survey, from 37 per cent stating likewise in the previous one. The drop in confidence comes in the wake of the economy’s growth declining to five percent in 2012-13 from 6.2 per cent in 2011-12.
In the present survey, 38 per cent of the respondents said availability of credit was an issue, almost double the percentage of participants saying this in the previous round. Also, the high cost of credit was reported to be a concern by 72 per cent of the participating companies. The corresponding number in the previous survey was 57 per cent.
The surveyed firms were also asked to indicate the interest rate they would be comfortable paying, given the current situation. An average of 9.4 per cent on working capital loans and 8.9 per cent on term loans was considered reasonable.
According to participants, measures to revive industrial growth needed to be taken up, mainly investments in stalled infrastructure projects. Companies also want implementation of the long-proposed goods and services tax and a cut in interest rates by the Reserve Bank. About 40 per cent of the respondents said they expected profits to be lower in the near term. Another 43 per cent said they did not see any change in profit levels over the next six months.
As for the overall economy, 21 per cent of the respondents expected an improvement in the overall condition over the next two quarters, relative to 49 per cent saying so in the previous round. Half expected no change. For their industry, 21 per cent expected an improvement in the near term, while about half anticipated a worsening.
