ASSOCHAM Survey

INDUSTRY

India Inc. sees sparkles only next Diwali, 

mood subdued this year: ASSOCHAM

 After a subdued Diwali this financial year, India Inc will certainly see a sparkle in the festive season of 2013-14 on the back of the manufacturing and exports returning to growth, an ASSOCHAM confidence Index showed. 

A vast majority of the 171 CEOs covered under the confidence from different sectors feel that it would take at least another six months for several segments of the industry to "repair" and "deleverage" their balance-sheets  before they march further on the growth path. The confidence index was measured in the two weeks ending November 7 across different verticals.

Segments such as banking, power, infrastructure, civil aviation and real estate are particularly in problems at present and most of the companies in these sectors are resorting to various means to get rid of excessive debts. Banks, in particular, have seen a big rise in their non-performing assets while the real estate firms are finding it difficult to liquidate their inventory, where large money is blocked. 

“On top of it, the promoters are not getting support from the stock market either. While between the Mahurat trading of last Diwali and the current festivities, the Sensex has gone up by about 1000 -1500 odd points, the sentiment remains muted despite some pick-up in the last few months driven largely by the recent initiatives of the Finance Ministry. 

However, in the horizon of  nine to 12  months, the situation is expected to improve as the CEO respondents see inflation coming under large control, interest rates softening and the global environment improving. “While we manage to keep up our spirits high during this Diwali, we see better and brighter prospects in the second half of 2013-14", said ASSOCHAM President Rajkumar N Dhoot. 

A large number of CEOs surveyed, as much as 61 per cent , felt that reviving overall economic growth to seven per cent is feasible in the next fiscal. They also foresee bigger FIIs inflows into the Indian markets on the back of pick-up in domestic demand and the government at least partly succeeding in consolidating its finances. Under the impact of global crisis and domestic factors, India's growth rate had declined to nine-year low of 6.5 per cent in 2011-12. The economic expansion in the current fiscal, according to Reserve Bank's projection may be just about 5.8 per cent, as RBI estimates. "Our own estimates are in line with the RBI with some downward bias", said Mr. Dhoot.  

The ASSOCHAM Chief said in the next financial year, the numbers would look better for different reasons. One of them would be a low base effect since the muted data of the current fiscal would be the starting point to build on. Besides, the situation in the western markets is expected to improve in the next six to nine months since their central banks are trying to revive the consumer confidence. The job market may also look better. All these factors would have a positive impact on the Indian exports which are struggling at present.

While the survey respondents said they do not expect the country's exports to exceed USD 300 billion this year, the shipments would definitely be better in 2013-14.Mr. Dhoot also said the ASSOCHAM Confidence Survey is broadly in line with the outlook projected by some of the multilateral organisations. According to IMF, while the global economy may just grow by about 3.3 per cent this year, it may be better at 3.6 per cent next year.