Industry awaits moderate growth in July-August

The industry upcountry foresees only a moderate business performance in the current quarter of the financial year, as just two-fifth in the sector expect the GDP growth to be more than 8 per cent, according to a chamber’s survey.

The respondents who are hopeful about an 8 per cent growth this time total only 40 per cent, compared to what was 62 per cent in the first (April-June) quarter of 2011-12, as per the study by the Confederation of Indian Industry.

The CII Northern Region Business Outlook Survey, which is based on responses from the industry across the northern region that comprises Chandigarh, Delhi, Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Uttar Pradesh and Uttarakhand, was undertaken during July 20 and August 19.

 

On the inflation front, 87 per cent of the respondents expect inflation to be greater than 7per cent; in fact, 58 per cent expect prices to rise by 8 per cent (against 52 per cent in the previous survey). Clearly, the RBI’s aggressive monetary policy to allay inflation has not made many in the industry too optimistic.

As for exports, 56 per cent expect an increase in volume of exports as against 42 per cent in the previous quarter.

Only 31 per cent of the respondents expect an increase in capital investment in the current three months as against 47 per cent in the previous survey. Rising interest rates have had an adverse impact on the investment, with 89 per cent of the respondents not increasing investment. What’s more, 38 per cent of this 89 per cent report a decline in investment.

The vibes, nonetheless, are positive when it comes to various elements that build up business confidence. In fact, 64 per cent expect overall sales to increase, as against only 39 per cent in the previous quarter — courtesy, expectations of higher new orders, production, employment and pre-tax profits. As for raw material costs, though, the current quarter says only 65 per cent expect an increase in raw material cost — it was 76 per cent in the previous quarter.

Also concerns abound about rising interest rates: 61 per cent expect a further increase in the cost of credit.

The status of electricity? Well, 53 per cent feels the power infrastructure is inadequate — 32 per cent respondents face power shortages of more than 10 hours a week; 91 per cent have in-house back up power facilities amid frequent cuts.

The outlook on exports is optimistic: 56 per cent expect an increase in volume of exports as against 42 per cent in the previous quarter. Also, 55 per cent expect an increase in new orders, compared to what was 37 per cent in the the previous quarter.

Key concerns? High raw material cost, which placed itself in the second rank in the previous survey, tops the slot this time. High interest rate has slipped to second spot from top slot in the previous survey. Inadequate skilled labour is the third most important concern. Infrastructure & institutional shortages and slackening consumer demand are the fourth and the fifth most important concern respectively.