Ahead of 2014 polls, India Inc pessimistic about reforms

India Inc remained pessimistic about the government taking any bold policy measures to boost growth, given the 2014 general elections, a survey said.

A snap poll conducted by the Confederation of Indian Industry (CII) shows that most CEOs were not optimistic about the outlook for the economy in 2012-13 and expected only a moderate recovery in the forthcoming year as well. As many as 76 per cent of the respondents did not expect economic reforms to move forward, given the upcoming 2014 general elections.

These reforms include introducing the Goods and Services Tax, increasing foreign direct investments in insurance, changing pension sector rules, allowing FDI in multi-brand retail, containing fiscal deficit through reduction in subsidies and allowing de-control of fuel prices, simplification of process for getting approvals and faster clearance of projects in the pipeline.

GDP grew 5.5 per cent in the first quarter of 2012-13, slightly above market expectations.

Nearly 44 per cent of the 75 members of CII’s national council polled expected GDP to grow below six per cent in 2012-13, while 44 per cent respondents expected a growth between six and 6.5 per cent. Nobody expected it to cross seven per cent.

Growth is not likely to improve drastically in 2013-14 either; 52 per cent expected GDP growth to remain in the range of six and 6.5 per cent, while only 36 per cent expected it to lie between 6.5 and 7.5 per cent.

Chandrajit Banerjee, director general, CII, said this reflected low confidence levels in the industry and that the first quarter GDP growth at 5.5 per cent corroborates that the slowdown is sustaining. “Our best hope would be that the economy is bottoming out. However, from the results of the snap poll or from government data, we do not have adequate indicators to substantiate this hypothesis,” he added.

Showing a little optimism on the inflation front, a majority of CEOs, 56 per cent, expected the average rate of inflation in 2012-13 to be in the range of seven to eight per cent. About 32 per cent of the respondents said it would be lower — between six and seven per cent — while only 12 per cent expected it to be higher — between eight and nine per cent. This is in line with RBI’s estimate of seven per cent inflation by March 2013.