Turnaround only in second half of year: CII survey

Turnaround only in second half of year: CII survey
The Financial Express, June 10, 2009, page 10

fe Bureaus, Chandigarh

An economic turnaround is expected in the second half of 2009-10 and beyond, predicts a recent CII northern region business outlook survey. The survey also says that the overall outlook for business is better for the current six months (April-September 2009) compared to the actual performance for the previous six months (October-March 2008-09).

The survey is based on 132 responses received from industry across Chandigarh, Delhi, Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Uttar Pradesh and Uttarakhand.

As many as 64% of the respondents were from the manufacturing sector and 36% from the services sector. As many as 72% of the respondents expect GDP growth to be in the range of 5-7%. Against 48.5% of the respondents expecting a GDP growth of less than 7% in the April-November 2008-09 survey, 86% of the respondents this time expect a GDP growth of less than 7%. This indicates a growing convergence towards the view that the Indian economy would witness some moderation in growth rates in wake of the global slowdown.

On inflation, 87% respondents expect inflation to be above 2% in 2009-10, ruling out possibility of sustained deflation. Given the slowdown, 96% respondents expect a turnaround only in the second half of 2009-10 or beyond.

The survey also looked into the expectations on various elements that build up business confidence, with encouraging results. As many as 33% respondents expect an increase in investments during the current six months.

Capacity utilisation is expected to improve, with 55% respondents expecting capacity utilisation greater than 75% against 40% respondents reporting a capacity utilisation of over 75% in last six months. As many as 62% respondents expect an increase in sales against only 39% respondents reporting an increase in last six months.

As many as 56% of the respondents expect production to increase, against only 32% reporting an increase in the last six months. On exports, 42% of the respondents expected an increase in volume compared to 29% actually reporting an increase in the last six months.

The credit availability is also expected to improve, with 26% of the respondents expecting it to increase against only 9% respondents reporting an increase in the last six months. However, 60% respondents expect no change in the situation. Despite the aggressive rate cuts by RBI, only 29% respondents reported a decline in the cost of credit.