Upbeat India Inc Expects Bold Decisions

Corporate India's confidence in the country's political economy is at an "unprecedented high" with key parameters indicating strong economic recovery and expectations of bold decisions by the finance minister in the ensuing Union budget, according to a business confidence survey conducted by the Federation of Indian Chambers of Commerce and Industry (Ficci).

The survey attributed the upswing in the industry's sentiments to an unexpected 6.8 per cent growth in the gross domestic product (GDP) during 1998-99, a pick-up in industrial growth, dramatic buoyancy in the stock markets, strong macro-economic indicators like low inflation, stable forex rates and comfortable forex reserves.

 

The Ficci Business Confidence Index rose by 2.2 per cent to 27.8 points from 25.6 points in the previous survey conducted in October, last year.

According to the survey, most corporate entities anticipate the government to take bold economic decisions in the budget, with 79.4 per cent of the respondents expecting decisions on divestment of more public sector undertakings.

Nearly 50 per cent of the participants in the survey also feel that the government will tax the rural rich.

While 45 per cent of the respondents to the survey anticipate that the government will take a decision on closure of terminally sick companies by putting in place an adequate safety net, 30 per cent participants are hopeful that government will effect downsizing of its manpower.

Indian corporates view the convergence among major political parties for the passage of key economic legislations like the Insurance Bill and Fema as indicative of the democratic maturity of the Indian political system.

With 95 per cent of the respondents being upbeat about the passage of insurance and Fema legislations, expectations are that the government will initiate steps for the passage of pending bills like Companies Amendment Bill, amendment to the Contract Labour Regulation Act and Patents Bill.

The industry is also bullish about the industrial growth during the current fiscal with 62 per cent of the participants expecting a growth rate between 6-8 per cent. However, 18 per cent of the industrialists surveyed estimated the industrial output to be over eight per cent. The bullish outlook is against the earlier survey's findings wherein only 53 per cent of the respondents were hopeful of industrial growth rate ranging between four and six per cent.

However, the domestic industry is expecting a higher fiscal deficit at 6-7 per cent of the GDP as against the budgeted target of just 4 per cent.

Great Expectations

----------------------------------------------------------------

Macro-economic indicators Current survey Prev. Survey (Oct 99)

----------------------------------------------------------------

GDP 6-7 (80) 5-6 (86)

Industrial Growth 6-8 (62) 4-6 (53)

Prime lending rate 12-13 (44) 12-13 (53)

Inflation 3-5 (55) 3-5 (42.4)

Exchange Rate Rs 42/45/US $ (75) Rs 42-45/US $ (54.5)

Fiscal deficit (as % of GDP) 6-7 (64) 5-7 (65)

Stock Market (BSE sensex) <5500 (74) 4500-5000 (50)

----------------------------------------------------------------

Figures in brackets indicate % of respondents (Figures in %)

----------------------------------------------------------------

Response to Insurance Bills and FEMA

-----------------------------------------------------------------

Not significant Significant Highly significant

-----------------------------------------------------------------

Insurance Bill 4 39 57

Fema 8 38 54

-----------------------------------------------------------------