According to a new survey of 118 CEOs, most Indian CEOs expect the rupee to strengthen against the dollar, interest rates to fall marginally or be stable and consumer demand to improve in 2008. The study was conducted by Business Standard.

A majority of the CEOs in the survey feels the emerging political situation at the Centre could derail the pending economic reforms agenda (nuclear power, foreign direct investment in retail etc).

A sizeable chunk expressed concern that social unrest against large industrial projects could rise in the coming year. Overall, inadequate infrastructure development, the rising rupee and the impending global slowdown were mentioned as the top concerns that could cripple Indian growth story.

The poll was conducted in December throughout the country and included big and small firms from all major sectors including metals, automobiles, information technology, engineering, hotel and tourism, real estate, aviation, pharmaceuticals, financial services and consumer durables.

In line with 2007 trends, 102 of the 118 CEOs (86.4 per cent) said the rupee would gain against the dollar in 2008. Sixty four said the rupee would touch 38 against the dollar by December 2008, 25 put the number at 37 and two said it could climb to 36 against the greenback.

In other words, these CEOs expect large capital inflows to continue, driven largely by higher interest rates here, which will drive down the dollar. Seventy CEOs (59.3 percent) said interest rates, which hold the key to capital inflows, would soften in 2008, while 34 (28.8 percent) said rates would be stable. While 24 CEOs said rates could soften by 50 basis points, 20 said the fall could be as much as 100 basis points. Nine felt the fall could be steeper - 150 to 200 basis points.

"We expect interest rates to soften by at least 100 to 200 basis points. It looks like interest rates in the economy have peaked out," said Infosys Technologies Managing Director & CEO Kris Gopalakrishnan.

Still, 83 CEOs (70.3 per cent) said they expect consumer demand to be higher than in 2007 and 23 (19.5 per cent) said it would be at the same level. "With rising disposable incomes and burgeoning middle class, consumer demand is only expected to rise," said Malvinder Singh, CEO and managing director, Ranbaxy Laboratories.

Unlike China, India's growth is driven by domestic demand and not exports. Thus, Indian companies can be expected to report good numbers in the coming year too. What could help consumer demand is the award of the Sixth Pay Commission for 33 million central government employees likely to be implemented in 2008.

"There will be some moderation in reforms. Whether it's the present government or some other government, there will be some moderation," said Deepak Khaitan, executive vice-chairman and managing director, Eveready Industries India.