India Inc hits pause button on fresh investments

India Inc remains wary of making fresh investments, with subdued demand being a key overhang for businesses, even as concerns grow over muted recovery in the industrial sector, says a poll.

The global economic situation, according to the poll, remains fragile and any firm recovery remains elusive as 64 per cent of the participants signalled that demand situation would remain worrisome.

The Ficci Business Confidence Survey drew responses from some 120 companies with a turnover ranging from Rs 3 crore to Rs 65,000 crore, spanning across sectors. It gauged expectations between April and September 2016.

About 35 per cent respondents said they expect higher investments over April-September, as against 41 per cent in the previous round. The companies stayed cautious about making fresh commitments and about 46 per cent saw no change in investment levels.

"Given the slew of measures undertaken in about past two years to kick-start investments, the respondents were asked to indicate if they have witnessed any improvement in investment activity in and around their area of operation and a majority of them said they are yet to see investment fructifying," Ficci stated on the poll findings.

Those who indicated that things are gaining ground reported activity mostly in infrastructure projects, including roads and highways, railways, renewable energy and defence. However, the overall business confidence Index was seven notches higher at 64.3 in the present round compared to 56.7 in the previous one. The proportion of respondents citing a "moderately to substantially better" performance vis-a-vis last six months noted an increase at all the three levels - economy, industry and firm. Also, in the current round, participants seemed more positive about the near-term prospects. However, while the outlook with regard to parameters like sales, exports and employment did mark an improvement, the respondents still didn't seem sanguine about investment prospects and improvement in profit levels.

Moreover, the muted recovery in the industrial sector remains a worry. The manufacturing growth numbers have not been very encouraging and the same is reflected in the financials of the companies as well.

Besides, nearly 58 per cent of the participating companies foresee higher sales over the coming six months, as against 48 per cent earlier.

"The anticipated pick-up in sales despite investment intention remaining subdued indicates companies looking at rolling out unutilised capacity," Ficci noted.
SLUGGISH MOOD

• Concerns grow over muted recovery in the industrial sector, says a poll
• 64% of the participants signalled demand situation would remain worrisome
• Survey drew responses from some 120 companies with a turnover ranging from Rs 3 cr to Rs 65,000 cr, spanning across sectors
• 35 % respondents said they expect higher investments over Apr-Sep, as against 41% in the previous round
• Infrastructure projects, including roads, railways, renewable energy and defence are doing well
• Outlook in sales, exports and employment did mark an improvement