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Indian Economy to fare better, but Business Confidence Low

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While 2012-2013 logged one of lowest Economic growth rate in recent years, year 2013-14 is expected to fare much better. In the current (2012-13) financial year, last couple of quarters have witnessed some of the lowest growth rates in past decade (5.3% for the quarter ended Sept 2012 and 5.5% growth in the June quarter).

Indias GDP Growth Rate

However, according to a survey by industry body PHDCCI, most of the Indian corporates expect India’s  economy to growth between 6 to 7.5 percent in 2013-14.  Over Over 77 percent respondents of the survey expect the slowdown to bottom out in 2013-14.

Though the growth is expected to rise, events in in last couple of quarters have drained the consumer confidence further. According to Business Outlook Survey published by CII, Indian consumers are not confident about India’s economic outlook. The Business Confidence Index fell 1.4 points as compared to previous quarter from 51.3 percent to 49.9 percent, second lowest in past 7 years.

Business Confidence Index

Highlights of Business Confidence Survey [Oct-Dec 2012-13]

  • 34% percent of respondents expect GDP growth to lie within a range of 5.5-6.0 per cent for 2012-13 and 33% expect growth to lie within an even lower range of 5.0-5.5 percent.
  • 36.8% of respondents expect average inflation to lie in a range of 7.0-8.0 per cent, while 29.2% expect it to come in a range of 8.0-9.0%.
  • 54.8% expect the fiscal deficit to lie in a range of 5.5-6.0% of GDP, while 24 per cent expect it to climb to a range of 6.0-6.5% of GDP in 2012-13.
  • 42.0% expect international investments to show a decline or no change in the third-quarter 2012-13, while 34.6% of respondents expect it to record any increase.
  • Most of the respondents expect no change in their value of production, inventory levels and employment in the third-quarter of 2012-13.
  • 81.7% saw the availability of credit decline or remain unchanged in the period July-September 2012 mainly due to prevailing higher interest rates.
  • 81.8 per cent saw their electricity & fuel cost going up during July-September 2012.

Business Outlook Survey reveals that, unlike in the previous survey, Domestic Economic / Political Instability has emerged as the topmost concern for most firms, followed by High Interest Rate and Infrastructure and Institutional Shortages.

It is clear that given the prevailing circumstances, consumer confidence is quite low, however, the policy changes made by Government over last couple of months are expected to reap rewards in coming quarters. Also, the coming budget will also be keenly watched..

What do you think? where do you expect India’s economy to head in 2013-14?

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