The Hindu Business Line : `Oil price rise, interest rate hike impact biz confidence'

Global oil price rise and hardening of interest rates in the country have adversely impacted the overall business confidence, says the Business Confidence Survey conducted by FICCI for the first quarter of the current fiscal.

According to the survey, corporates are concerned about near term performance on all operational parameters such as sales, selling price, profits, investments, employment and exports.

With the hike in interest rates, 36 per cent of the companies reported high cost of credit as a constraining factor to their business performance. Only 22 per cent of the companies reported likewise in the similar survey for the previous quarter.

The present round of the survey, conducted during July-August, shows that small and medium enterprises are more affected as the cost of borrowing goes up. It also points out that rising input prices continue to pose a challenge for companies attempting to maintain and improve their growth performance. For the third quarter in a row, 70 per cent of the companies have reported rising cost of raw materials as a constraining factor.

Nearly 20 per cent of the firms foresaw lower profitability in the next six months — a figure much higher than the 8 per cent obtained in a survey for the previous quarter.

Further, with falling export expectations over the next six months, possibly due to slackening global growth, capacity utilisation levels are expected to reduce in the near future. The proportion of firms with capacity utilisation of over 75 per cent has gone down from 77 per cent in the last survey to 57 per cent in the present survey.

The recent rise in interest rates has had the expected reaction from industry in the form of lowered growth projections. The results of this survey clearly point out that the authorities' should address supply side constraints to sustain industry's growth performance, said the chamber.

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