Interim budget can boost demand: CII Survey
At a time when overall demand in the economy continues to remain subdued, delaying an economic recovery, the interim budget presented by the Finance Ministry on 17th February is expected provide some relief. However, rising cost of credit is a top concern for Indian industry.
This was the view from a poll of CEOs conducted by CII at its National Council meeting after presentation of the interim budget. An overwhelming 74 per cent of the respondents said that the interim budget would help increase overall demand moderately in the next six months whereas 21 per cent believed that budget announcements would not lead to any change.
Similarly, 38 per cent of CEOs listed high interest costs as their major concern going forward. This was in contrast to the results of the previous such poll when political uncertainty was ranked as the highest source of worry for industry.
Commenting on the survey results, Chandrajit Banerjee, Director General, CII stated, "The increase in demand expected from announcements of the interim budget would ensure that growth recovery is not compromised during the transition period of the government. Without sacrificing the objective of fiscal consolidation, the Finance Minister's attempt to provide a fillip to manufacturing sector by altering excise duties in a few critical sectors is commendable."
In a reflection of the improving demand situation in the domestic and global economy, albeit mild, a majority of the respondents expected their gross sales, exports, capacity utilization and net profit to improve moderately in fourth quarter of current fiscal from the previous quarter. Moderate increase was expected by over 71 respondents in gross sales and 48 per cent in exports, 48 per cent in capacity utilization, 38 per cent in investment and 48 per cent in net profit.
The mild improvement in business conditions has so far, however, failed to raise credit demand as 57 per cent of the respondents expected no change. This indicates that new investment activities have not yet started picking up. Majority of the respondents (42 per cent) said that they foresee investment revival only from the third quarter of next fiscal. New investment decisions are apparently awaiting the formation of the new government at the centre.
Interestingly, political uncertainty did not emerge as the topmost concern of the CEOs. When asked to rank the top risk factors to the business outlook in the current quarter, only 19 per cent mentioned political uncertainty in comparison to 38 per cent who rated rising borrowings cost as the topmost concern. Inflation was the top concern for only 14 of the respondents whereas moderating GDP growth was the topmost concern for 23 per cent of the respondents.
(Posted on 24-02-2014)