India would see improvement in its growth performance: survey

Corporate India’s confidence on the state of the economy is on an upswing, with a majority of the companies surveyed by industry body Federation of Indian Chambers of Commerce and Industry (FICCI) agreeing that the government stimulus has spurred economic activities.

“Going ahead India would see an improvement in its growth performance,” the chamber’s Business Confidence Survey for the first quarter of 2009-10 said.

The business confidence index for the period of April to June moved up to 67.2 from 64.1 in the last quarter of 2008-09. However, poor progress and spread of the monsoon this year could be a dampener for the economy, it found on the flip side.

With regard to expectations about the overall economic conditions, “we see that close to 73 per cent of the companies feel that things would improve in the coming six months,” the survey said.

With major segments of the economy posting good growth numbers in the first quarter of this fiscal and global recession showing signs of easing, performances are likely to improve in the near term.

Four out of five respondents felt that the fiscal stimulus measures announced by the government are having a tangible effect with India’s economic performance, it said. In the first quarter of this fiscal, India’s GDP grew by 6.1 per cent despite the global financial meltdown.

Besides the weak demand, the other factors that are adversely affecting the performance of industry are rising cost of raw materials, manpower and high cost of credit, the survey found out.

“With regard to availability of credit, we see that about 27 per cent of the companies (mainly in the SME sector) are feeling constrained on this account,” FICCI said.

A large proportion of the companies covered in the survey felt that high fiscal deficit and the massive borrowing programme of the government may lead to hardening of interest rates and crowding out the private sector from the credit market in the coming months.

Recently the Planning Commission had said the fiscal deficit, the difference between total revenue and expenditure, will not exceed the budgetary estimate of 6.8 per cent of Gross Domestic Product (GDP).

During the current fiscal, the government had decided to borrow Rs. 4.5 lakh crore from the market, up from Rs. 3.1 lakh crore in 2008-09. A higher fiscal deficit would mean taking more loans from banks at the cost of industry and other borrowers.

In the survey, 372 companies from sectors like textiles, cement, steel, leather, chemicals and fertilizers, oil and gas, auto and machinery participated.