New Delhi: Global financial crisis has added to the woes of corporate India, which has suffered erosion in the business confidence in recent months, and several firms are forced to put off their investment plans, an industry survey has said.
Of the 348 firms included in the FICCI Business Confidence Survey, 56% reported weakening of demand in the first quarter of the fiscal 2008-09. It has put margins under stress. What is worse: it is reflected in the firms’ outlook for the coming six months.
“Global financial crisis and weak demand have added hardship for the Indian corporates in a globalised market,” the survey stated. vestments.
As much as 57% of the companies surveyed said things have gone “moderately-to-substantially better”. The people in this category accounted for 70% a year ago.
India’s gross domestic product is expanding at a lesser pace this year than an impressive 9% in 2007-08. The economy grew by 7.9% in the April-June period of 2008-09. The growth for the year may be between 7.5% and eight per cent.
“Other notable trends in the survey include a sharp reduction in the pricing power of the companies... The profit margins of the companies are under severe stress and same is reflected in the firms’ outlook in the coming six months,” it added.
SME segment has been the worst affected sector as its interest cost has risen by 3.5% to 5.5% over the last one year compared with 1.5% to 2.5% for larger firms, the Ficci’s Business Confidence Survey said.
“Nearly 97% of the participants agreed that it is the SME segment that is facing the pressure most on account of the hardening interest rates,” it said.
Companies have demanded that the RBI, in consultation with the government, should look at a scheme that offers productivity linked benefits or incentives to SMEs, it said.
Nearly 20% of the companies indicated dependence on retail loans for sales.
However, about one-fifth of the comparance in the smooth functioning of the companies, include weak demand, constrained availability of credit and high cost of credit.