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Outlook survey says companies
expect higher growth
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Non-manufacturing companies
expect higher growth than manufacturing
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Government’s procedural delays
hampering business and increasing costs
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Belying stock market reverses, a Confederation of Indian Industry (CII)
outlook survey says that compared to six months ago, significant increase in
business confidence has hiked growth expectations for the current financial
year by over 8%. The increase of 2.1 points in the CII Business Confidence
Index (CII-BCI) for April-September 2006 was significantly higher among
non-manufacturing firms engaged in services compared with manufacturing firms.
|
Metric |
Percentage |
|
Those Planning to increase
investment |
88% |
|
Those expecting to max capacity
utilization |
75% |
|
Those expecting to exceed
capacity utilization |
25% |
|
Those expecting value of
production to increase |
81% |
|
Those who reported increase in
value of production |
75% |
|
Those expecting increase in new
orders |
83% |
|
Those who reported increases in
new orders |
74% |
|
Those expecting to employ more
people |
53% |
|
Those who reported increases in
employment |
50% |
|
Those expecting export expansion
|
70% |
|
Those who reported increased
exports |
55% |
Despite such good news, 78% of the respondents said that Government induced
procedural delays is increasing transactions costs and reducing margins.
Investment bankers say that while 2 mega special economic zones (SEZ) are
being announced and a big rush to build other such projects has created new
opportunities for the India's economy, there is still a lot of policy work
pending. Morgan Stanley was quoted saying that while the SEZ policy has
initiated over 100 applications to create SEZs, “real” SEZs will require major
policy changes. The current SEZ policy consolidates the SEZ laws scattered
across different legislation into one.
Since most of the new SEZs are miniscule in size, the scale-related advantage
of an SEZ is not possible. They say that many of these proposed investments
could be mere substitution of investments that would have otherwise taken place
outside the SEZ area and that the new SEZ investments are unlikely to provide
the much-needed boost to the Indian small and medium sector competitiveness.
The only two SEZ announced so far are “real” ones and both by India’s largest
private sector company
Reliance
Industries. However, even these are much smaller than the major SEZs
operating in China in Shenzhen, Xiamen, and Zhuhai.
They say that SEZs have to be seen as means for creating larger inroads into
small and medium scale manufacturing and for quick support to high-quality
infrastructure. They should be provided a liberal and positive business
environment leading to increased manufacturing exports.
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