Q2 business expectations up amid concern over trade, jobs

Q2 business expectations up amid concern over trade, jobs
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First Published: Tue, Oct 30 2007. 01 08 AM IST
Updated: Tue, Oct 30 2007. 01 08 AM IST
Mumbai: After staging over 30% growth for two years in a row, credit growth has come down to 23.5%, but this should not imply a slowdown. The Reserve Bank of India’s (RBI) industrial outlook survey for July-September reveals that business expectation indices, based on assessment for July-September and on expectations for October-December, have gone up by 2.7% each over the previous quarter.
This is on account of improvement in expectations for most of the parameters of the survey, such as overall business situation, production, availability of finance, order books, capacity utilization, and profit margin. However, expectations of increase in exports, imports, employment and selling prices were lower than those in the previous quarter, RBI said in ‘Macroeconomic and Monetary Developments: Mid-Term Review 2007-08’, released on Monday—a day ahead of the central bank’s mid-term review of monetary policy.
Overall, surveys conducted by various agencies present a mixed short-term outlook of the economy. For instance, a Federation of Indian Chambers of Commerce and Industry (Ficci) survey shows a marginal decline of 0.9% during April-June quarter over previous quarter on concerns of rupee appreciation and rising interest rates. Ficci expectations index for July-December, however, showed improvement of 2.8% over the previous survey, RBI said.
According to a Dun and Bradstreet survey for October-December, the index rose 15.5% over the preceding quarter, albeit over a low base. While RBI’s estimation for the real gross domestic product (GDP) growth for April-July was around 8.5%, other agencies indicated a growth in the 8.3-9.3% range.
RBI said three years of interest rate increases are “containing” inflation, implying that borrowing costs may be kept unchanged. “Pre-emptive monetary measures since mid-2004, accompanied by fiscal and supply-side measures have helped in containing inflation,” RBI said.
RBI governor Yaga Venugopal Reddy has managed to drag inflation to below the central bank’s 5% target by raising interest rates nine times since October 2004 and lifting the cash reserve ratio on four occasions to 7%.
“Headline inflation has remained suppressed due to a halt in pass-through of higher international prices to domestic prices since February 2007,” the central bank said. The annual wholesale price inflation softened to a five-year low of 3.07% in mid-October, well below RBI’s 5% comfort ceiling. Retail prices of petrol and diesel were last revised in February, when they were cut. RBI said between February and September, global crude prices rose by almost 35%.
Reuters and Bloomberg contributed to this story.
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First Published: Tue, Oct 30 2007. 01 08 AM IST
More Topics: Q2 | Trade | Jobs | Money Matters | Currency |