India Inc expects feel good factor to evaporate

New Delhi, May 6: FICCI's Quarterly survey for the year 2006-07 is a contradictory picture, while India Inc expects a dampening of the feel good factor witnessed for the last two years but does not plan to bring major changes at the enterprise level.

Firms have plans to export more, invest more and thus generate more employment in the next six months despite the fact fewer firms anticipate higher profits and sales. While the survey offers no explanation for its paradoxical behavior, a plausable explanation for the bahaviour that the firms will react to the gradually to the evolving macro economic situation. And despite the fact that they do not expect higher profits and sales, there is stickiness in their decision to alter their export plans.

The overall Business Confidence Index has taken a beating compared with the index in the third quarter of 2006-07, down from 75 to 69. Yet, in Q4 (2006-07) as compared with Q3 of the year.

The results of FICCI's latest survey reveal a clear divergence between industries in their response to current conditions.

Depending upon their proximity to the ultimate consumers they have different perceptions.

The graded response received from the industry shows the industry is fragmented in its confidence level and that there exists an invers relation between the optimism level of a sector and the strength of its linkage with consumer expenditure.

FICCI's Business Confidence Survey for the fourth quarter of the fiscal 2006-07 drew responses from 418 companies from a wide geographical and sectoral spread. Companies participating in this survey had turnover ranging from Rs 2 crore to Rs 50,000 crore.

Respondents to the survey were largely from sectors such as cement, pharmaceutical, textiles, food and beverages, heavy equipment and machinery, financial services, paper, metal and metal products, chemicals and fertilizers, FMCG, IT, infrastructure, auto and auto ancilliary, construction and retail estate, steel and petrochemicals. Fifty-six per cent of the respondents were from the heavy industry sector, 30 per cent from light industry and 14 per cent from the services sector.

As the package of anti-inflationary measures introduced by the RBI will impact consumer spending first, industries such as food processing, textiles, housing, construction and automobiles are apprehnsive about fall in demand and profits in the term.

Basic and intermediate goods industries such as basic metals and alloys, cement, chemicals, machinery and equipment and non-metallic mineral products, which do not depend upon direct consumer spending, are looking forward to more buoyant overall conditions. These segments are yet to face the heat of the measures taken top control inflation and unless we are quickly able to introduce fresh triggers to growth in the medium term, their current optimism may give way.

UNI