Survey on Current State of Economy January 2013
-2FICCI Survey on Current State of Economy, January 2013 Highlights The global economic situation continues to be difficult. Economic situation in both US and Euro area remains uncertain. U.S. gross domestic product shrank 0.1% in the fourth quarter of 2012—the worst performance since 2009. Wednesday's Federal Open Market Committee statement acknowledged that economic activity paused in recent months, but there was no change to monetary policy. Amidst this there have been visible signs of slowdown in India’s economy as well. The flagging industrial growth and exports have become serious concerns. Nonetheless, the slew of reform measures rolled out in September last year provided some support to the dwindling investor confidence and there were some signs of return in resilience. The investment activity however continues to be sluggish. Given the above backdrop and the fact that the Union Budget FY14 is around the corner, FICCI conducted a quick survey to gauge the current state of the Indian economy and understand the expectations of the industry from the forthcoming budget. The participants clearly put forth their apprehension about the current business environment in the country. A majority 77% of the respondents to the survey felt that the current business environment in the country is not favourable for capacity expansion. In fact respondents stated that investing outside India is easier and better than undertaking investments within the domestic economy. This observation was shared by about 62% of the participating companies. Yes 23% 62% No 77% 38%
Is the current business environment favourable? Is investing outside India better than investing within the country? Will interest rate cut give a boost to investments at this juncture?
Source: FICCI’s Survey on Current State of Economy, January, 2013
Also, surveyed respondents almost unanimously (a 90 per cent of respondents) felt that a cut in the interest rates is essential to give impetus to investments. Similar sentiment was shared by the respondents of the recently released FICCI’s Economic Outlook Survey (EOS). ....3
-3With the Union Budget for FY14 to be announced next month, the respondents were asked to indicate their top three expectations from the forthcoming budget. Some of key demands highlighted were – Rolling out the Goods and Services Tax at the earliest. Giving a booster shot to infrastructure sector and capital spending. Supporting manufacturing growth through incentives and providing for suitable fund allocation to the export sector. Moving ahead on the path of fiscal consolidation through rationalizing subsides and bringing about some stability in direct and indirect tax (cut in excise and customs) structure. Focus on the Agriculture and Rural sector and removing supply side bottlenecks in agriculture value chain. Increase outlay to social sectors like health and education to take forward social inclusion agenda. The participants were also asked to point out the key impediments hindering their business performance. Most of the respondents pointed out following areas of concern to which a speedy resolution is must to create a favourable business environment: Land Acquisition Power supply Contract Labor and unavailability of skilled labor Regulatory Uncertainty and constant intervention, excessive litigation Delay in getting environment clearances Lack of clarity and stability in taxation policies Weak Demand High cost of inputs
-4Survey Background The present survey on the “Current State of the Economy” has been conducted in the backdrop of the forthcoming Budget FY14 and the persistent challenges facing the economy. The survey was conducted over the past one week and drew responses from varied focus sectors of FICCI like manufacturing, agriculture, health and education, chemical and chemical products, energy and power, medical devices et...
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