Corporate India finds itself caught between two cleft sticks, with its turnover rising, but profits remaining under pressure due to the fast pace of rise in input price and inability to adjust final price of goods in the face of intense competition from imports, according to a Ficci survey.
A large proportion of the companies participating in Ficci’s Business Confidence Survey said it was facing stiff competition from imported goods. Wages had also increased and were adding to the overall cost pressures. In these circumstances, another rise in policy rates by the Reserve Bank of India (RBI) would hit industry hard when the international pressure is getting tougher. Given these concerns on the one hand and the possibility of further increase in interest rates in the months ahead on the other, companies have sounded a note of caution about performance at the company and industry level.
Companies continue to face pressure due to borrowing costs. While the move over from the PLR regime to the base rate regime is being seen to lead to greater competition among banks for customers and force them to increase efficiency, companies do not foresee any benefit accruing to them in terms of lowering of borrowing costs resulting from this change.
The survey notes the macro situation is also getting vitiated on account of the stubbornly high inflation rates and the perpetual question over the state of the global economy. These developments have dented the confidence level of corporate India with all the three confidence indices computed by Ficci seeing decline in their value. The Current Conditions Index has fallen almost five notches, from 76.3 in the last round to 71.1 this time. The Expectation Index took a value of 72.2, while in the previous survey it was 74.1. With both the indices registering a decline, the Overall Business Confidence Index fell from its value of 74.8 in the previous survey to 71.9 in the present round.
GDP growth to be 8.5%: CII
Despite global uncertainties, industry has projected India’s economy to grow 8.5-9 per cent this financial year, but also voiced concern over the double-digit inflation, according to a CII survey. “Businesses are upbeat on the domestic economy despite the global uncertainties and are maintaining their investment momentum,” CII President Hari Bhartia said.
Mr. FICCIwalas! Today you are raising your voice. Time is coming when all the manufacturing activities in India will come to a standstill because imported goods will be cheaper and our own manufactured product will be costly and unattractive to the people. India will be simply an importer country.
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