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India’s Business Confidence Erodes Sharply in June

Jul 20, 2012 7:53 AM   By Dilipp S Nag
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RAPAPORT... India’s business confidence experienced a sharp erosion in June as compared with six months earlier and it could take at least another two quarters before the mood turns “somewhat better,” according to the latest ASSOCHAM Business Confidence Survey.

There is, however, a silver lining so to speak as the majority of the respondents felt that the current downturn would show some recovery in the next few months. As many as 51.6 percent respondents said that the macroeconomic situation is worse than what was prevailing six months ago, though 40.3 percent stated that they are optimistic about the future.

“While the mood for the future is somewhat optimistic, we have to ensure that the business environment improves and the domestic demand picks up, especially at a time when hopes of global economic recovery are bleak,” said Rajkumar Dhoot, ASSOCHAM’s president. “Both the government and the Reserve Bank of India (RBI) should work together to provide a congenial atmosphere so that the industry can respond with better investment and consumers can get a boost.”

About 52 percent of the respondents felt that their sales volume would increase but this ratio has declined between the latest June survey and the one undertaken by ASSOCHAM in March.

According to the survey, a majority felt that prices will remain more or less same. However, there has been a fall in respondents who believe that prices would be higher. “Manufacturers would find it extremely difficult to pass on the increasing cost to the consumer in the given scenario. This is why we must ensure lowering of costs both raw material and interest,” Dhoot said.

The survey found profits will decline. Thirty six percent of the respondents felt that their bottom line would recede in the coming two quarters. Fifty five percent  said that their level of investments would not change in the six months from the present level.

About 45 percent of respondents said that weak demand in foreign market is of a lesser concern while 39 percent believed that export volume may improve from here on. Even as the RBI is working on the monetary policy credit review, about 74 percent of the respondents said high cost of credit is an area of main concern and it is suppressing the domestic demand.

“The areas like automobile, realty and consumer durables are the worst affected by high cost of credit,” Dhoot noted.
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Tags: ASSOCHAM, Business Confidence, Dilipp S Nag, India, Policy, Rajkumar Dhoot, Rapaport, RBI, Reserve Bank of India
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