Hit by the global economic meltdown, lack of fundsand falling exports, corporate India's business confidence has sunk to a seven-yearlow, says the latest FICCI survey by anindustry lobby. The Survey for the second quarter of 2008-09 said there hasbeen a significant deterioration at three levels- economy, industry andorganisation.


"With exporters facing cancellation of orders, and ahuge majority of the corporate putting brakes on fresh hiring of hands and bankloans still hard to come by, there is a sense of gloom in corporate boardrooms,"said the survey report, which was written before the Rs.70 billion fraud inSatyam Computer Services, India's fourth largest IT company, broke.


Survey results also show that close to 88 percent of the companies'feel that the economic situation has deteriorated over the last six months.Further, 52 percent feel the overall economic conditions would weaken furtherin the coming six months. The report said this deterioration is mirrored in thevalue of current conditions index, which has witnessed a steep decline from alevel of 45.8 in the last survey to a low of 24.7, falling into the "significantlypessimistic" zone. Further, with expectations with regard to performanceat the economy, industry and firm levels also taking a significant beating, theExpectations Index has also fallen from its value of 55.9 in the last survey to44.3 in the latest one.


The Overall Business Confidence Index has dippedsignificantly from 52.5 in the last survey to 37.8. The survey also noted thatbuyer's behaviour is changing at a quick pace, and companies are reporting thatforeign buyers are demanding discounts. "Companies said that they havealready started facing cancellation of orders and that price competition fromother countries (particularly China) is pinching them hard. And while defaulton payments has not emerged as a major concern as of now, foreign buyers aredefinitely asking for longer period for making payments and some of them havealso stopped making advance payments," the report said.


About 84 percent of the companies said they have alreadyimposed or are considering imposing limits on fresh hiring, while 68 percentsaid they have decided to or are considering not filling vacancies. Almost 57percent reported that to bring down costs, they have started or are planning toreduce casual workers. The survey also said the benefits of easier monetarypolicy are not reaching the corporate sector and easy credit availabilityremained a key issue for India Inc.


Nearly 70 percent of the companies said that even aftermonetary measures by RBI (Reserve Bank of India), banks have yet not easedcredit disbursal norms and have also not increased lending to corporate."A majority 55 percent also reported that banks have not reduced interest ratesfor corporate lending.


Originallypublished in The Stitch Times: March 2009