Encouragingly, respondents did not consider the pace of reforms as a major problem now, buoyed by a slew of reform measures initiated by the government in recent months. In fact, most (38.9 per cent) of the respondents felt that reform measures announced by the government would have a positive impact on investments, even though the impact on output may take some time to take effect. Therefore, despite the reform measures, the majority of firms expect the GDP growth in the current fiscal to remain subdued in the range of 5.5-6.0 per cent.
The survey also indicates continuing elevated trend in inflation and fiscal deficit in the remaining period of the current fiscal. Majority of the respondents expect WPI-based inflation for the current fiscal to end up as high as 7.0-8.0 per cent, much higher than RBI’s comfort level. Regarding the fiscal deficit, the largest proportion of firms (54.8 per cent) expected it to lie in the range of 5.5-6.0 per cent of GDP, way higher than the revised government target of 5.3 per cent for 2012-13.
Most of the respondents in the CII survey did not see any change in their value of production and employment in the third-quarter of 2012-13, even though they did see overall sales and new orders to pick up, which could mainly be linked to the rise in demand owing to the festival season in the quarter under consideration.
Indicating that firms are now using the existing capacity rigorously rather than going for expansion, the largest proportion (41.2 per cent) of the firms saw their capacity utilization in the range of 75-100 per cent in the third quarter, moving up from 50-75 per cent in the previous quarter.
Bulk of the respondents (51.5 per cent) in the survey saw the domestic investments of their firms to register either a decline or no change in the Oct-Dec 2012 quarter. This is a worrying sign, and underlines the need for pro-active measures to restart the investment cycle.