BUSINESS CONFIDENCE AT 5- Yr. LOW

The latest business confidence survey of the Indian industry, released by FICCI on 5th December, 2007 shows that, the Overall Business Confidence Index, which measures the comfort level of the industry declined by seven points than the previous survey in August this year and stood at a five year low value of 61.2.
The main reasons given for this are-
1. The annual 15% appreciation of the Rupee.
2. Subsequent decline in export growth.
3. High interest rates.
4. Companies supplying raw material and intermediate goods to export driven sectors are also facing the brunt of the appreciating rupee and high interest rates.
5. Rise of oil prices.
6. Uncertainties over the fall out of US sub-prime crisis.
7. RBI maintaining its tight monetary stance.
8. India's GDP growth rate dipped to 8.9 per cent during the second quarter of current financial year from 10.2 per cent in the comparable period last year.
The recent survey thus highlights the degree of apprehension that Indian businessmen have over the future state of Indian economy. Overall it shows the expectations of a slowdown in the economy. The business confidence index survey helps the businesses, banks and the government with their policy formation. Therefore their findings are very vital for the economy. The key finding of the recent survey are -
1. Not only the export oriented units but firms even distantly connected with exports are getting hit because of the rising Rupee.
2. Consumer goods, intermediate goods and capital goods sectors are the most affected.
3. It is not only the slowdown in exports but the moderation in other sectors also that is slowing down the overall economic growth momentum.
4. Due to rising Rupee a number of exporters have shifted their focus to Indian markets. This is resulting in excessive supplies.
Policy suggestions to counter this situation are –
1. The RBI must review its credit policy.
2. Steps should be taken to prevent further Rupee rise.