India Inc sees slow down ahead

Indian companies expect industrial growth, already slipping in the last 2-3 months, slow down further in the next six months, according to a pre-budget survey by the industry association FICCI.

FICCI’s latest survey showed a fall in the overall business confidence index from 76.2 in the previous round to 63.8 in the current one. The index relating to expectations in the next six months slipped from 76.6 to 64.

“The major problem area is input cost inflation which is hitting industry hard,” FICCI, which lobbies for companies, said.

“Close to 90 per cent of the firms that participated in FICCI’s BCS point to rising cost of raw materials and industrial inputs as a ‘negative factor’ impeding their business performance,” it added.

The survey included 296 companies with a turnover ranging from Rs. 1 crore to Rs. 2,00,000 crore from all sectors, during January and February 2011.

Nearly 70 per cent of the respondents are under pressure due to rising manpower costs, the second most important factor hurting members of Indian industry. As a result, 1 out of 4 firms expects its profit level to be lower in the next six months.

Nearly 53 per cent of the firms say that they would increase selling prices in the next six months, compared to 26 per cent in the previous survey.

FICCI, which opposes raising interest rates to curb prise rise, said interest rate hikes by RBI seven times since March 2010 have started impacting industry’s performance. Nearly 53 per cent of the firms have said that high lending rates by banks are having an impact on their operations, it said.

As a suggestion, FICCI demanded that Government should not withdraw stimulus measures, as suggested by the Prime Minister’s economic council yesterday.

It also repeated the need for the introduction of Goods and Services Tax [GST] in place of sales tax etc..