Tuesday, July 31, 2007

India Inc Negative About Biz Outlook

Even as the International Monetary Fund (IMF) has emanated optimism on the Indian economy, India Inc appears to think otherwise. The industry here is less optimistic about the business outlook this quarter than it was on the previous quarter or even for the quarter a year ago, according to a survey by RBI, in its latest report on the macro and monetary developments. Besides, private equity flows could slow down following monetary tightening by central banks. Painting a not too optimistic picture of the real economy, RBI''s business expectation index for July-September''07 declined by 3% over the previous quarter from 51.7 to 49.5. The index was compiled after surveying over 1,000 corporates. The survey based on net response (difference between those who were optimistic and those pessimistic) on quarter ahead expectation about the industrial performance was less favourable on most parameters. The respondents were not too optimistic on many of the major parameters such as overall business situation, production, working capital finance, order books, capacity utilisation, exports, employment and profit margin. In the banking sector, in spite of the slowdown in credit offtake, the real estate sector accounted for the highest growth of 69.7% between May 2006 and May 2007, among various segments that banks gave loans.

Other personal loans too grew at 56.8%. Home loans followed by infrastructure and trade loans accounted for the highest quantum in absolute terms during the period. The central bank has noted that asset price inflation, essentially that of stock and bullion have ended up being much higher than goods and services inflation. Stock markets have been booming on account of large foreign investor interest here.

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