High costs to weaken Indian firms’ profits: Survey

High costs to weaken Indian firms’ profits: Survey

New Delhi: Rising raw material costs, wages and interest rates may hurt Indian corporate profits and growth over the next six months, a survey published on Monday showed, with about half the firms reconsidering or deferring investments.

In a quarterly survey of 348 firms by industry body Federation of Indian Chambers of Commerce and Industry (FICCI), the majority of respondents also saw the Indian economy remaining the same or worsening over the next two quarters.

Just 21% of the firms said their profits would rise in the next two quarters and 44% saw them declining. Sales were seen improving by 58% of the firms, while 17 percents saw them down, according to the survey.

The survey showed 42% of participants expected their industry would improve over the next two quarters, compared with 44% who indicated so in the previous round of the poll.

“With input and manpower costs on the rise, the profit margins of the companies are under severe stress and the same is reflected in the firms’ outlook for profit in the coming six months," FICCI said in a statement on the survey findings.

The Indian central bank raised its key lending rate thrice in June and July to a seven-year high of 9% to curb double-digit inflation, crimping consumer demand and making funds for company expansions more costly.

This has contributed to a moderation in Asia’s third largest economy, which expanded an annual 7.9% in the June quarter, the slowest pace in 3-“ years and well below the rate of 9 percent of more clocked over the past three fiscal years.