Industrial Recovery Imminent, Says Industrial Survey

Industrial recovery in India is imminent. This is the finding of a recent survey undertaken by the PHD Chamber. Indian Industry is of the view that, after reeling under the impact of global slowdown over the last one year, the economy and industry have started showing some signs of improvement in recent months. Respondents feel that a modest recovery is on the anvil, spurred mainly by the stimulus package, which would have a positive impact on demand and would further lift sentiments during the next six months. The survey had 186 responses.

According to the survey, an overwhelming 90 per cent of companies are hopeful of industrial revival during 2009-10 indicating that our economy is on the path of recovery and units could expect better times ahead.

Is Industrial revival imminent in 200910? Perception of respondents

A break up shows a majority of 51 per cent perceive that their business would grow by 5-20 per cent. Another 16 per cent display greater enthusiasm by predicting 21-50 per cent growth in the next six months. What is more, around 4 per cent, especially smaller companies, even envisage a growth rate of over 50 per cent. However, a significant 22 per cent are still doubtful about the extent of recovery and expect their business to grow at a modest 0-5 per cent while around 7 per cent expect negative growth in commercial transactions in the next six months.

Perceived growth outlook of business in 200910.

There are still numerous challenges which could come in the way of a decisive economic recovery. Respondents were of the view that the two most pressing risk factors are the uncertain recovery of the global economy and the spectre of rising interest rates. Among the other problems included low consumer spending, rising exchange rates, revival of labour problems, infrastructure deficiency, deficient monsoon, unrealistic Government policies and lack of political consensus on reforms.

"According to the Survey, the immediate focus of the Government should be to desist from introducing monetary tightening measures and retain fiscal incentives provided by way of stimulus packages to revive demand and increase private consumption expenditure. Besides, infrastructure bottlenecks need to be addressed and skill development initiatives should be taken on a priority basis", said Satish Bagrodia, President, PHD Chamber.

Some specific policy suggestions bought out in the Survey are:

  • Bring decision making by Government officials / departments on a fast track. Government formalities such as renewal of licences, obtaining no objection certificate (NOC) etc. should be completed within a certain time frame to lower the transactions cost of business, with provision of deemed approval, in case of delay by the regulatory authorities.
  • Augment public investment in infrastructure like roads, ports, inland air connectivity etc. to revive the economy. Ensure early completion of various components of the national highway development projects. More such projects should be commissioned.
  • Waive royalty, stowing excise duty, Paryavaran Upkar, Vikas Upkar and Central Sales Tax on Coal supplied by Coal India Ltd to captive power plants (CPP).
  • Move towards an Indian Common Market by abolishing local taxes like entry tax in some of the states.
  • Encourage participation of companies in trade fairs through MDA and MIF schemes. Government organizations should help industry to explore new markets for Indian products. Special exhibitions should be organized by EPC, FIEO etc. for made in India products.
  • Interference by Labour Department in industrial units should be minimised.
  • Enhance public investment in agriculture for improving infrastructural facilities especially at post-harvesting stage by introducing mechanized drying and storage of crops which would help farmers to get better price for the crop and prevent deterioration of grain after harvesting. Assure better quality seeds and necessary incentives for good agronomic practices.

"Though the Indian industry is hopeful and optimistic, the Government has to take some positive steps to make the recovery process smoother, faster and on solid ground", added Bagrodia.

Originally published in The Stitch Times; December 2009