“In the coming six months, there seems to be growing optimism in terms of the economic performance with 80 per cent respondents feeling that the state of the Indian economy would be better,” the Biz Con survey for September pointed out. The percentages of optimist respondents in the June 2015 round were close to about 54.8 per cent.
As to tentative recovery in the last six months, the survey explained while there were signs of economic recovery underway, the situation is still far from robust.
The underlying economic activity, remains weak on account of the sustained decline in exports, rainfall deficiency and weaker than expected momentum in industrial production and investment activity.
“But riding on hopes of some decisive decisions expected after the Bihar elections, the industry respondents remain optimistic about improvement in the sentiment, though at the present moment broad demand and investment activity remains subdued,” the chamber Secretary General D. S. Rawat said.
Another reason for the positive outlook stems from the macro-economic stability that will help bring down further interest rates, less volatility in the foreign exchange market and ease of doing business, he added.
However, when it comes to the period between June and September this year, the coverage period of the Biz Con Survey, majority of the industry feels (60 per cent) that the present economic situation is more or less same vis-à-vis the situation six months back.
Coming to specifics, the firms felt that though sales volume would pick up going forward, a commensurate change may not be visible on the profitability.
That means, the power with the producer to improve margins on increasing sales would remain limited. As many as 68 per cent of the respondents expect that during October to December 2015 their sales volume will further increase, adds the survey.
In terms of cost of credit we see that majority of the respondents (44.0 percent) feel that there is no change in the cost of credit during July to September 2015. This is slightly surprising considering the fact that the monetary authority has reduced the policy rates.
The possible explanation to this could be that the benefit of the rate cuts is not being passed onto the industry appropriately.
However, the industry feels that possible there could be a decline in the cost of credit going forward. A rise in investment is critical for a sustained pick-up in overall economic activity, the survey pointed out.
However, the survey seems to reflect that in terms of the domestic investments it is believed by the majority of the respondents (56 per cent) that there has been no change in the firm investment plans. The sentiment seems to grow even more going forward with 60 percent respondents of the view that October to December 2015 quarter also would not see much change in the investment levels.
Courtesy – The Hindu, India’s English Language Daily