Rising deficit, more competition and lack of credit of concern
While general optimism reigns among the leaders of India, rising inflation, the rupee and the global economy are all causing corporate bosses to worry.
According to a fresh survey by the Confederation of Indian Industry (CII), the business confidence index for the third quarter of last year declined to 48.6 from 53.6 in the previous quarter.
The business lobby group said in its quarterly update that companies were worried about the government's rising fiscal deficit, a surge in imports, increasing competition, slow introduction of reforms and regulation, and the continuing lack of manpower.
Lack of available credit was also one of the main causes for worry, the CII said.
"A worrisome trend that emerges in the survey is that a majority of firms registered a stagnation or decline in availability of credit in Q2 [second quarter] 2011-12. The majority continue to expect credit availability to be constrained in Q3 2011-12," the survey said.
CII researchers said small and medium-sized enterprises (SMEs) were the most worried, expecting investments across all sectors to fall or remain the same in the last quarter of last year.
But the CII said firms of all sizes across sectors had reported a slowdown in sales, production and profits during the third quarter of last year compared to the same period a year before, causing companies to worry about the coming year.
Businesses do believe there is light at the end of the tunnel. Once inflation eased, companies believed people would have more money to spend and demand would start to increase, the survey found.
India's budget, due out in the middle of next month, will be watched carefully by corporations hoping for a company-friendly budget.
Business lobby groups want India's decision makers to help to boost overall confidence and the chamber is calling for the government to tackle the issues affecting business confidence in the country.
"Issues of high importance that need to be addressed include land availability, labour reforms, cost of capital, taxation regime, transportation infrastructure, availability and cost of power and environmental clearances," the CII said.
CII representatives, from across sectors in corporate India, have been vocal in saying they do not want a rise in service tax or excise duty or lower customs duties, which the confederation fears would further hurt domestic trade.
It said infrastructure development in the country was the key to boosting business sentiment. The sector needs further support that can be achieved by adopting unified infrastructure standards, launching a dispute settlement body, increasing the country's power supply and streamlining infrastructure financing options, the CII said..
It is also calling for reduction in public spending, plus subsidies to boost India's growth.
* Pia Heikkila