'International developments affect Indian industry'

Tuesday, 29 April 2003, 07:00 Hrs
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NEW DELHI: International developments have dented the confidence of Indian industry in spite of fairly good growth in the manufacturing, services and export sectors, a survey by a business lobby revealed.

The 2002-03 fourth quarterly business confidence report of the Federation of Indian Chambers of Commerce and Industry (FICCI) released here Monday is based on response from 584 diverse companies this month when the war in Iraq was in its final stages.

"Despite strong fundamentals of the economy like the buoyant industrial growth, fairly steady growth of the services sector and sustained export momentum, business confidence has been dented due to the international developments like the war in Iraq, outbreak of sever acute respiratory syndrome (SARS) and continued slide in global economy. The effect of these has been reflected in confidence surveys conducted in several countries. Internally, problems with implementing value added tax (VAT) has created uncertainties for the industry," states the report.

Other events like India's decision to postpone the switch over to VAT from June 1 instead of April 1, the 10-day truckers' strike and the rapid spread of SARS also taken into account during the course of the survey, the FICCI report stated.

While the combined effect of all these factors has adversely affected business sentiments, some glimmers of hope have also appeared on the horizon.

"The external risk posed by the developments in Iraq appears to have disturbed the Indian industry. While the war in Iraq may be over, the repercussions are expected worldwide, India included, in the next few months. This is brought out by the respondents' concern about domestic oil prices, inflation, industrial growth and exports," according to the report.

On the positive side, "any negative impact on foreign investment flows, exchange rate, imports and balance of payment (BOP) has however been dismissed", states the report.

The current overall economic conditions compared to the last six months have been viewed as "moderately to substantially better" by 50 percent of the respondents. The corresponding figure in the chamber's last survey was 71 percent.

Around 56 percent expect the economy to perform "moderately to substantially better" in the next six months as compared to 68 percent in the last FICCI survey.

"This dampening of spirits, despite a continued buoyant performance by both industry and services, can be attributed to the drought factor, which initially was downplayed by the Indian industry. The dip in agricultural GDP by 7.9 percent in the third quarter along with the forecast for a second below normal monsoon seem to be playing on the minds of the respondents," the report notes.

The agriculture experts are however as yet not upset by the prospect of a summer monsoon slightly below normal as they feel the forecast of the Indian meteorological department is too early and gives no indications of any possible impact on the farm sector.

Source: IANS
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