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Economic uncertainty hitting business prospects: CII

Uncertainty is still lingering among industry players regarding the country's business prospects, a survey conducted by Confederation of Indian Industry (CII) said Sunday.

"This 'status quo' in the index value mirrors the air of uncertainty that is still lingering among industry regarding the present business prospects and throws into question the hopes of an early turn-around," CII director general Chandrajit Banerjee said.

The survey result remained almost unchanged at 51.2 for April-June 2013 quarter as compared to the previous one.

The reading for the January-March 2013 quarter had risen above the psychological 50-level mark to 51.3, after dipping to 49.9 in the October-December 2012 quarter.

The survey is based on the responses from 180 members. Most respondents (57.1 percent) belonged to largescale firms, while the rest were from the MSME sector.

The top three areas of concern for most firms were domestic economic and political instability, high levels of corruption and infrastructure and institutional shortages. But risk from exchange rate volatility was ranked as the lowest concern for businesses at this moment in the survey.

The survey indicates that most respondents (47.8 percent) expect GDP growth to improve and come in a range of 6.0-6.5 percent for the current fiscal as compared to five percent in 2012-13.

This is in line with CII's expectations for GDP to lie between 6.0-6.4 percent for the current year.

However, in an indication that the downside risks to growth have not abated yet, 36 percent of the respondents expect GDP to grow below six percent in the current year.

Most of the respondent firms (40 percent) expect WPI inflation to remain above seven percent for the current fiscal.

"The rise in WPI inflation forecast for the current fiscal is certainly not good news for the economy as a moderating trend in inflation would have given RBI the legroom to ease interest rates in order to spur growth," Banerjee said.

The twin deficits - fiscal and current account - have emerged as key policy concerns lately.

The survey reveals that almost 60 percent of the respondents expect fiscal deficit to lie in a range of 4.5 to 5.5 percent of GDP in 2013-14 as against the budgeted 4.8 percent of GDP for the year.

However, 23.3 percent of respondents also see the fiscal deficit breaching the 5.5 percent mark in the current fiscal.

On the current account deficit front, the survey gives out a gloomy picture, with a majority of the respondent firms (51 percent) expecting it to lie in a range of 4-5 percent of GDP.

Another 33.3 percent expect it to exceed five percent. This is way higher than the 2.5 to 3 percent range deemed sustainable by the Reserve Bank of India (RBI).

However, a majority of the respondents in the survey expect improvement in their sales, new orders, exports and value of production in the first quarter of 2013-14 from the levels of previous quarter.

Further, 48.3 percent of the respondents also expect their capacity utilization to reach as high as 75-100 percent in the first quarter of the current fiscal.

"All these indicators point towards the likelihood of revival in economic prospects of firms in the current quarter; however, these could be too early to predict as other indicators don't look so propitious," Banerjee said.