THE Business Confidence Survey, carried out by the Federation of Indian Chambers of Commerce & Industry (FICCI), has dipped to a two-year low. Though depressing, the results are scarcely surprising, given the United Progressive Alliance (UPA) government’s pathetic governance in the last seven years.
According to the survey, the Overall Business Confidence Index value plummeted to 51.6 in the present survey (the first quarter of 2011-12) from 63.7 in the previous survey (Q4 of 2010-11). It shows the expectations of India Inc for the six-month period, from July to December 2011. The 295 companies surveyed were of various sizes, between Rs 1 crore to Rs 2,50,000 crore, and spread all over the country and sectors. It was conducted during July 2011.
The survey rightly listed the factors, global as well as domestic, for the widespread gloom: “Both global and domestic, seem to have dented the level of confidence of India Inc. At the global level, with both the US and the Euro area reeling under a fiscal crisis, there are growing apprehensions about the world economy entering into another recession. At the domestic level, rising interest cost and weak domestic demand (both in part, attributable to the contractionary monetary policy pursued by RBI) are taking toll.”
Prudently, the business chamber did not mention the anti-industry stance of the UPA regime and the despair emanating from it (few want to displease their political masters). It did, however, point out the measures that the government should take to boost the morale of businesspersons. So, one of the survey highlights is “governance framework (should be improved) to ensure quick policy implementation and fast-track project clearances.”
Other recommendations emphasise the need to address issues related to land acquisition expeditiously, bring down the cost of credit particularly for the small and medium enterprises, ensure introduction of GST and DTC from April 2012, further FDI reforms in areas like insurance and multi-brand retail, and increase spending on infrastructure sector as this would have a multiplier effect across sectors.
The survey results suggest bearishness in the perception of the respondents about the state of the Indian economy. They are not very optimistic about the economy’s performance during Q2 and Q3 of this fiscal.
Industrial growth also does not evoke great hope. “It may be noted that the current fiscal year (2011-12) started with a moderate growth in industrial production. In the first two months—April and May 2011—the growth rate in Index of Industrial Production (IIP) was a moderate 5.8 per cent and 5.9 per cent respectively. Further, while data on IIP growth for the month of June 2011 does indicate a pickup in growth to 8.8 per cent, it is unlikely that this would be maintained in the months ahead,” the survey says.
The survey has also underlined a big worry: “The flagging of business confidence in India should be a matter of concern for policymakers as falling confidence levels of India Inc. can take a toll on investments and other business plans and which could undermine our economic growth.”
The trillion-dollar question is: are policymakers listening? One thing is sure: they know about the despair of industry. Delivering a key-note address on ‘Two Decades of Reforms—The Economy Today’ at a function organised by the Confederation of Indian Industry on August 7, Finance Minister Pranab Mukherjee waxed eloquent about the resilience of Indian economy. He told industrialists, “I am recollecting these factors here because industry seems to be less optimistic about the economic prognosis for the country today, than it was earlier.”
He went to promise a great leap forward in terms of economic reforms: “The government has outlined a significant legislative agenda for the financial sector which we hope to pursue in the coming days in the ongoing Parliament session.”
Unfortunately, such solemn pledges do not instill much enthusiasm among the business community, which has come to expect only bad measures from the Congress-led government. The Sonia Gandhi-headed National Advisory Council (NAC), which has thrust many a disastrous decision on the country, is particularly anti-business. Which is not surprising, given the fact that many NAC members are incorrigible Leftists.
Not only the government knows what industry wants, it knows that businessmen’s demands are genuine. For instance, Economic Survey 2010-11 stressed on, among other things, streamlining of environment clearance for infrastructure projects and land acquisition. Like the FICCI survey, the government’s document also laid a lot of emphasis on infrastructure through public-private partnerships.
In short, what the government needs is not knowledge or expert counsel but political will to act. That is missing.