India's corporate optimism has sunk on worries about the global economy and weakening demand, according to a new survey on Oct. 6, as the stock market and rupee fell to fresh lows. Some 57% of the 348 firms in the cross-sector survey reported Asia's third-largest economy had grown "moderately to substantially worse" in the first quarter of the financial year.
In the same April-June period last year, just 12% believed the business climate had deteriorated, the survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) said.
The findings came days ahead of the start of India's quarterly reporting season and as the stock market fell to a two-year-low amid concerns about the world credit crisis while the rupee hit a five-year low against the dollar.
The BSE benchmark 30-share Sensex index tumbled 469.65 points or 3.75% on Oct. 6 to hit an intraday low of 12,056.67 -- a level last seen in October 2006 -- as risk-adverse investors continued to pull out funds. The outward flow of investment pushed the rupee down to 47.35 to the dollar, its weakest level since April 2003.
As of Oct. 3, Indian shares had lost more than 38% so far this year on overseas fund outflows of $9.17 billion. During the same period last year, overseas funds bought $13.62 billion worth of Indian stocks.
More than 50% of those companies surveyed forecast India's economy would remain the same or worsen over the next two quarters.
The global financial crisis along with "the high cost of credit, reduced availability of funds and weak demand have created added hardship for the Indian corporates in a globalised market," the FICCI said.
Earlier, Indian policymakers insisted it would largely escape fallout from the U.S.-led financial turmoil thanks to its still mainly insulated economy. But lately, policymakers have changed their tune, with the government's Economic Advisory Council warning no country can "expect to emerge unscathed."
Interest rates at seven-year peaks aimed at wrestling down double-digit domestic inflation have hit borrowing costs, weakening demand and corporate expansion.
Copyright Agence France-Presse, 2008
