According to an ASSOCHAM Business Barometer Survey of 237 CEOs, the corporate sector expects the period of downturn in the Indian economy to continue till May 2010 before bouncing back in response to the fiscal and monetary policy stimulus and abatement of recession in the international economy.
In the ABB Survey, 84% of the CEOs polled across various business segments were unanimous about the view that poor Business Confidence in India may extend till the middle of the next year.
Mr Sajjan Jindal President of ASSOCHAM said that around 77% of the industry heads believed that the growth rebound would be faster and sooner in India than the developed economies of US and Europe.
The ABB Survey Economic Outlook for India was based on the responses from 237 CEOs and MD across fifteen sectors at small, medium and large scale level companies. The survey was done during the month of February.
Mr Jindal said that spill over of world recession into Indian economy enhanced by the tight monetary policy has hit the aggregate demand hitting the growth rate severely. The industrial production has slipped into negative zone. Huge job cuts across various sectors have worsened the situation.
The key driving factors for end of slowdown in India cited by the ABB respondents included reduction of repo rate and reverse repo rates infusing liquidity in the markets, government in terms of improved fiscal spending and fall in inflation providing cushion to the industry in terms of reduced cost.
The industry expects the economic activity to pick momentum after the elections as the stalled projects would resume and fresh budgetary allocations would further boost the economy. The combined impact of these factors would be felt after the end of the fiscal 2009-10.
Even as the growth rate is expected to turn northwards again by 2010, the industry heads do not expect the commodity price boom to materialize by the time. Almost 68% of the survey respondents believed that it would take long time for the excess capacity built during the boom time to be fully utilized.
The foreign trade scenario is expected to worsen in coming months despite the depreciating Rupee and incentives announced by the government. Around 62% of the CEOs expect the growth rate to remain in negative zone as there are bleak chances for the recovery of consumption rate in US.
Beside, about 60% of the Indian GDP is domestic consumption and the percentage contribution of exports is 23%. Hence, even as it would be difficult for the export sector to revive by the end of 2009, the Indian economy may regain its lost momentum in response to government investments and domestic consumption.
The Real estate sector has faced stagnant demand due to tight monetary policy followed by the Reserve Bank and decline in economic activity. While the home loan rates have come down subsequent to deduction of policy rates by the central bank, the ABB respondents stated that the sector would enter the growth trajectory once the whole economy started growing. They expect the sector to revive by the end of the year 2010.
Meanwhile, the investment scenario in the Indian economy has also taken the hit as both domestic as well as foreign investment dipped due to credit crunch and declining demand. As many as 73% of the CEOs polled by the ABB expect the investments to recoup by the end of the year 2009 as domestic consumption potential would pull the investors to the economy.
Source : Steelguru