Substantiating the fragile economic recovery argument, most of the respondents (48 per cent) expect only moderate recovery in gross sales in the fourth quarter over the previous one. Recovery in sales, even if moderate, is underpinned mainly by revival in export demand in the backdrop of improvement in global economic prospects.
Over 60 per cent of the respondents felt that their exports would increase at a moderate pace during the current quarter. Notably, improvement in sales is being supported by an improvement in capacity utilization, as over half (53 per cent) of respondents expect their capacity utilization to improve moderately in the fourth quarter.
Even though most (38 per cent) of the CEOs saw investment staying at around the same level in the fourth quarter as in the third quarter, next highest 29 per cent respondents expected it to increase moderately over the same time period. In view of the stagnation of investment expansion in majority cases, credit demand was also seen to stagnate in the fourth quarter by majority (52 per cent) of the respondents.
“For investment activities to pick up, a decisive revival in domestic demand for consumer goods is vital. High food inflation, growth uncertainty and rising borrowing costs have all impeded consumer demand. With inflation showing some signs of moderation, it is time that the monetary policy is now directed at stimulating growth,” suggested Chandrajit Banerjee.
Indicating that the economy may have to manage with fragile recovery in the short-term, the survey indicates that there will be a major turnaround in investment activities not before the third quarter of the next fiscal. This is not surprising, given the phase of political uncertainty existing till the formation of a new government at the centre. When asked to rank the risk factors to their business outlook, majority (58 per cent) of the respondents mentioned political uncertainty as the biggest concern.