India Inc. not sanguine about growth

Heads of industry do not share the optimism of the government and RBI, shows CII poll of CEOs.

Updated - August 29, 2021 11:29 pm IST

Published - August 29, 2021 10:27 pm IST - NEW DELHI

ANDHRA PRADESH, VIJAYAWADA, 19-05-2020: Workers loading chilli bags on a lorry at a warehouse in Guntur district on May 19, 2020. With government giving relaxation for goods vehicles, transportation of essential goods resumed in the State. Photo: K.V.S. Giri / The Hindu

ANDHRA PRADESH, VIJAYAWADA, 19-05-2020: Workers loading chilli bags on a lorry at a warehouse in Guntur district on May 19, 2020. With government giving relaxation for goods vehicles, transportation of essential goods resumed in the State. Photo: K.V.S. Giri / The Hindu

Indian industry does not seem to share the government and the Reserve Bank of India’s optimism about this year’s growth prospects, according to a poll of CEOs conducted by the Confederation of Indian Industry (CII).

Nearly two-thirds of CEOs of large corporates polled by CII at its national council meeting earlier this month expect India’s GDP growth in 2021-22 to be 9% or less.

The central bank has recently downgraded its GDP growth projection for the year to 9.5% from 10.5% earlier, while the Chief Economic Advisor Krishnamurthy Subramanian expects growth to be at 11% as estimated in the Economic Survey.

Just 12% of CEOs expect growth to be over 10%, while 20% expect GDP to grow at 8% or less than 8%. As many as 44% of CEOs expect growth to be between 8% and 9%, while 23% expect it to hit the 9%-10% range.

While policy makers have been stressing that inflation is a transient problem, industry captains coping with high commodity prices and transportation costs are not so sure.

Just 33% CEOs expect average retail inflation during the year to cool off from the present level (5.6% in July), while 67% expect it to be uncomfortably close to or beyond the RBI’s monetary policy tolerance threshold of 6%. 30% of CEOs polled by CII, in fact, expect average inflation to go past 6% over the year.

On the investment front, over half the CEOs attributed the lack of animal spirits and new investment plans to the fact that the ease of doing business remains cumbersome at the ground level.

33% of the CEOs said fresh investments were not in the offing as current capacities exceed demand, while 32% also blamed the high cost of doing business in the country, by which they didn’t refer to the cost of capital. Just 15% of CEOs said the cost of capital (read interest rates) is high.

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