Indian Business Confidence Slumps as Economy Slows

At five-year low

Indian business confidence has slumped to a five-year low on the back of flagging exports, aggressive monetary tightening and a rising rupee that has slowed the economy, a survey said on Dec. 5. The report by the Federation of Indian Chambers of Commerce and Industry was the latest sign firms are hurting from interest rates at five-year highs, a rupee up 12.5% against the dollar this year and export woes.

The Overall Business Confidence Index showed a 10.5% decline to 61.2 points from 68.4 in the last survey. It was down 15% from the July to September period a year earlier. A lower reading on the zero to 100 scale means greater pessimism.

"India Inc's business confidence is at a five-year low and the outlook for exports, investments, employment and profits has taken a severe hit," said the second-quarter survey of 321 companies in Asia's third-largest economy. "Companies are worried about a slowdown with oil prices high, the rupee's rise, high rates and uncertainty about how the U.S. subprime crisis will impact," federation economist Anshuman Khanna said.

The findings followed data last week showing economic growth slowed to 8.9 % in the second quarter to September, still second only to China, but analysts predicted a further weakening in months ahead.

Analysts have forecast between 8.3% and nine percent growth in this fiscal year to March 2008 after the economy expanded by 9.4% last year, its fastest in nearly two decades. But some analysts say growth could slow to seven percent next year. "Even growth of seven, 7.5% is very good when you look at growth in the West of two or 2.5%," said Khanna.

"But we need to take growth to double digits to make it more inclusive," he said, to embrace tens of millions of desperately poor Indians who have seen no impact from the nation's economic boom.

Copyright Agence France-Presse, 2007

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