The Hindu Business Line : Overall biz confidence index down, says FICCI survey

REPERCUSSIONS of the Iraq war, postponement of changeover of value-added tax (VAT), truckers' strike and the rapid spread of Severe Acute Respiratory Symptom (SARS), the lagged drought effect and the resultant cost pressures have been highlighted as the main dampeners to the business environment.

The Federation of Indian Chambers of Commerce and Industry's (FICCI) quarterly business confidence survey (BCS) for the fourth quarter of the fiscal 2002-03 across sectors conducted this month revealed that the overall business confidence index was down by 8.4 per cent to 63.3 per cent.

The current overall economic conditions vis-à-vis the last six months has been viewed as `moderately to substantially better' by 50 per cent of the respondents. The corresponding figure in FICCI's last BCS was 71 per cent. Almost 56 per cent expect the economy to perform moderately to substantially better in the next six months as compared to 68 per cent in the last survey.

"This dampening of spirit, despite a continued buoyant performance by both industry and services, can be attributed to the drought factor that initially was downplayed by India Inc. The dip in agricultural GDP by 7.9 per cent 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 survey said.

The external risks posed by developments in Iraq also appear to have distributed the corporate sector. While the war in Iraq might be over, the repercussions were expected to be felt the world over, India included, in the next few months. This was brought out by the respondents concern about domestic oil prices, inflation, industrial growth and exports, the survey said adding that any negative impact on foreign investment flows, exchange rate, imports and balance of payment had, however, been dismissed.

Further, the response of corporate India, to minimise the impact of an oil shock resulting from adverse developments in the future was: energy conservation and promoting efficiency in use of petroleum products, developing and using alternative sources of energy, building of strategic petroleum reserves, having a floating tariff regime for oil imports, and geographical diversification of sources of oil imports.

The sceptical outlook for the economy extends to the realm of corporate sector's perception regarding the performance of their individual industries. Only 47 per cent of the respondents felt that current performance of their industry is `moderately to substantially better' vis-à-vis the last six months. This is down from the 58 per cent obtained in the last survey.

Weak demand, threat of imports, availability of credit, cost of credit and inadequate infrastructure were also pointed out as factors adversely affecting business performance.

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