India Inc.'s confidence up, but rising costs a concern

New Delhi: India Inc.'s confidence is up, though high interest rates and rising costs of raw materials and manpower have marred its capacity to do better, a survey released on Sunday said.

According to the Federation of Indian Chambers of Commerce and Industry (FICCI), corporate India's confidence in the state of the economy, industry and firm-level performance is on the upswing.

"While availability of credit is not a problem, the corporate sector's capacity to do better is being marred by the rising cost of raw materials and manpower and high rates of interest," said FICCI's Business Confidence Survey (BCS) for the first quarter of 2009-10.

The survey said there is a general consensus among members of corporate India that the fiscal stimulus measures have an impact on economic activities.

About 80 percent of the companies subscribe to that view – and that going ahead India would see an improvement in its growth performance.

The survey drew responses from 372 companies with a wide geographical and sectoral spread. These companies have a turnover ranging from Rs1 crore to Rs1,16,000 crore and are from varied sectors.

According to the respondents, while the companies are still to get out of the shock resulting from the global economic crisis, the poor progress and spread of monsoon this year could act as a dampener for the economy.

Besides a weak demand, the factors adversely affecting the performance of Indian corporates are the rising cost of raw materials, rising manpower costs and high cost of credit with 55 per cent, 45 per cent and 41 per cent of the participating companies respectively complaining about the same.

About 27 per cent of the respondents, largely from the small and medium enterprise segment, feel constrained about credit availability.

On availability of credit from banks, 70 per cent respondents felt that high fiscal deficit and the government's massive borrowing programme may lead to hardening of interest rates and crowding out of the private sector from the credit market in the coming months.