The Hindu Business Line : Service cos expect rise in activity in next 12 months: KPMG survey

“The current optimism reflects the unique positioning that India has with its large domestic market, offshoring service capabilities and economic value drivers.”

Our Bureau

New Delhi, May 23 Close to 60 per cent of the respondents of KPMG’s Business Outlook Survey anticipate a rise in activity at their companies during the coming year. Only 2 per cent expect a decline.

Positive sentiment was most widespread amongst Indian firms. However, 40 per cent of Indian firms also expect to pass on rising input, salary, and raw material costs onto consumers.

New business

Nearly 61 per cent of service providers covered in the survey are betting on revenues rising from new orders, improved market conditions and new products. Indian firms were again the most optimistic about profits.

Over 60 per cent of service providers in India expect an increase in levels of business activity. This is to be supported by an anticipated strong rise in volumes of incoming new business; approximately 56 per cent of all companies forecast an increase in new work, with none expecting a fall.

Despite widespread concerns over intensifying competitive pressures in the Indian service sector, around 58 per cent of companies expect growth of revenues during the coming year. Increased revenues and profits are set to support rising levels of capital expenditure.

“The current optimism reflects the unique positioning that India has with its large domestic market, off shoring service capabilities and economic value drivers,” said Mr Russell Parera, CEO, KPMG in India.

While staffing levels are set to rise with around 41 per cent of panelists forecasting an increase in employment, companies also expect a greater amount of work to be outsourced.

Firms (43 per cent) expect a sharper annual rise in input prices, with salaries, outsourcing costs and raw materials all set to be sources of inflationary pressure. Around 40 per cent of companies forecast a faster annual rise in tariffs over the next 12 months.

Over half of BRIC service providers forecast annual growth of their total operating costs to accelerate over the next 12 months, citing dearer raw material prices, staff salaries and outsourcing costs. Inflationary expectations were particularly elevated in Russia.

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