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Industry feels economy has bottomed out – Assocham survey

India’s economic situation will improve significantly at all the three critical- macro, industry and firm levels in the coming six months, according to the latest and comprehensive round of the ASSOCHAM Bizcon Survey (ABS).

This is despite the fact that as of now, domestic demand remains weak and the global markets stay uncertain. But the industry seems to feel that the slowdown has bottomed out, the survey found.

The survey seems to reflect an overall feeling of optimism in the financial markets, particularly after the government initiated long-pending reforms such as allowing foreign investment in retail etc.. The Indian stock markets have started moving up after remaining in limbo for nearly three years.

Gauging and reflecting the mood of the business and the industry, the September Round of Survey found that though the situation on the ground did not change in the last six months, prospects have improved for the next two quarters.

“The good news is that the industry is optimistic and expects both the overall economic as well as their individual situations to be much better in the short to medium term horizon,” adds the survey.

Majority of the respondents (cumulatively 60.4) in the ABS were of the opinion that overall economic situation would be better. At the industry level 62.5 percent of industry shares the viewpoint the performance shall be better in the coming six months.

The most optimistic outlook, however, came from the respondents who said the state of affairs will improve between September, 2012 and February-March, 2013, the survey said.

“The ASSOCHAM BIZCON Survey, September 2012 round was conducted against the background of the prevailing economic slowdown and the decelerating industrial growth following serious political logjam to really gauge the impact of all these developments on the overall business climate. It has raised industry concerns like high cost of credit, poor infrastructure and certain regulatory issues delaying the project take-offs,” Chamber President Mr Rajkumar N Dhoot said while releasing the survey.

At the firm level, 65 per cent of the respondents felt that the selling price will remain more or less same. However, only 41.7 per cent felt that their profits are going to be pretty much at current levels in short term, thereby indicating that India Inc may face pressure to maintain their profitability.

In terms of fresh investment, about 46 per cent said that the situation would remain more or less the same. However, there was a rise in the respondents to 21 per cent in September ABS from 13 per cent in June 2012 who said that investments are expected to be lower.

The factors which still remain areas of concern include, weak demand in the domestic market and 54 per cent respondent believe that it would adversely impact their performance, the survey found.

High Cost of Credit concerns most of the ABS participants . 79 percent were of view that it is bound to affect their functioning adversely. The percentage of respondents who seem to feel that this is a worry has gone up between the June round and the current September round of the survey. They said the situation will be much better if interest rates are cut by the RBI.

Increasing Raw Material Prices: 79 percent believe that the rise in input price will have an adverse impact on their operations, while 66.7 percent of the respondents expect their firm’s order books position to improve in the coming six months.

The study suggested measures to revive industrial activity which include lowering of interest rates, infrastructure development and containing trade deficit.

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