Business confidence in India at a 4-year low: FICCI survey

Business confidence of India Inc has plunged to its lowest in more than four years with declining economic growth and widening twin deficits, a majority of firms have abandoned investment and hiring plans for at least the present, an industry survey revealed.

With the country's GDP growth hitting a 4-1/4-year low of 4.4 per cent year-on-year in the quarter ended June 2013, the overall business confidence index declined further to 49 in the latest survey by the Federation of Indian Chambers of Commerce and Industry (FICCI).

The survey compares business confidence level of corporate in India with the levels during the days of the financial crisis in 2008-09.

Results of FICCI's Business Confidence Survey showed that expectations regarding major operational parameters, including sales, profits, investments, exports and employment, have taken a beating.

Corporate's outlook regarding sales, profits, exports etc remained subdued, with a majority of respondents expecting status quo to continue for the next six months.

"A majority 67 per cent of the participating companies indicated that they don't intend any fresh hiring in near term and their workforce is expected to remain at the current levels," FICCI said in the survey report.

The survey conducted in July-August 2013, showed a moderation in the performance of companies compared to the previous six months.

Along with the continued slide in the business confidence level for the fourth successive year, respondents said the sharp fall in the rupee's value has affected their input costs, which in turn lowered their profitability.

''The participating companies were not optimistic about the near-term performance either. A discernible increase was seen in the proportion of respondents reporting a 'moderately to substantially worse' performance at the economy and industry level going ahead,'' the survey stated.

In fact, the proportion of respondents citing an increase in investment levels over the next two quarters declined to 21 per cent in the survey, from 37 per cent in the previous survey.

Thirty-eight per cent of the respondents said the availability of credit was an issue and the percentage of businesses complaining of non-availability of bank credit has almost doubled since FICCI's previous round of Business Confidence Survey.

Also, 72 per cent of the participating companies said the high cost of credit was a concern against the corresponding figure of 57 per cent in the previous survey.

Asked about the level of interest they prefer, businesses indicated an average interest rate of 9.4 per cent on working capital loan and 8.9 per cent on term loans as reasonable.

The recent measures undertaken by the government and the Reserve Bank of India to revive industrial growth, if taken to their logical ends, could help boost investments in infrastructure projects that are stalled needs to be expedited.

Corporates also wanted the goods and services tax implemented early.