FICCI & CII SURVEY - DEMAND IS FALLING; PESSIMISM RISING
By Ruma Dubey
When all chips were down in 2008-09, when all around the world, things looked gloomy and dark, the sun was shining bright in India. The moods were upbeat and despite global despondency, there was an air of optimism; the confidence that things will remain good in India.
Today, in 2012, the global turmoil continues but India seems to be worse off. There is only an air of pessimism and hopelessness and along business confidence is on the ebb. Pessimism and confidence are inversely proportional – lower the confidence, higher is the pessimism and vice versa.
FICCI's quarterly Business Confidence Survey for April-June 2012 is a pointer to exactly this fact. This survey covering 150 companies has stated that the overall Business Confidence Index for Q1FY13 was at 51.8, down from 60.3 in Q4FY12. And for the first time since the global economic crisis of 2008-09, FICCI stated that prospects of employment opportunities have turned negative.
And there does not seem to be much hope looking ahead as per a poll conducted by Confederation of Indian Industry (CII), covering 75 companies, 44% of the respondents feel that GDP growth for FY13 is estimated to remain below 6% and 50% believe that GDP could be less than 5.5%. Worse is that in FY14 too they do not expect things to improve as over 52% stated that in FY14 GDP will be in the range of 6 to 6.5%.
The underlying message which comes forth through both these surveys is that demand over the next few months is expected to fall and when demand falls, naturally, growth slows. So is demand falling because major part of the Indian population has turned spiritual and stopped pursuit of all things ‘material’? Well, maybe people are forced to give up material pursuits as their pockets simply do not allow them to buy much. With dipping savings, especially for retired senior citizens, no real innovation and soaring inflation, people prefer to sit tight on their savings. The uncertainty and lack of faith in governance is so high that people would rather save. Fuel and power prices are soaring and if one goes to the market with Rs.100 in the pocket, you can come back with a virtually empty shopping bag. The value of money, its ability to buy has gone down drastically.
On one hand, FICCI says that employment will grow with more ‘aam aadmi’ losing jobs and then on the other hand, we have CEOs taking huge pay hikes and earnings which could feed entire families for months. So is there some error in the way business is being conducted in India? Yes, the Govt, as we all know is responsible largely but is India Inc also adding fuel to this fire?
FICCI and CII have conducted a survey from the point of view of suppliers but what about those for whom this supply is being produced – the consumers? Well, according to Nielsen global consumer confidence index, that too is not faring to well. According to Nielsen survey, consumer confidence in India has declined for the first time in nine quarters due to weak employment sentiment and subdued spending behavior. India registered a decline of four points in the index to 119 from the first quarter of 2012 though it remains the number two most-confident countries in the world, following on the heels of Indonesia. What this survey also indicates is that consumer sentiments have taken a hit with rising prices and fuel prices, falling rupee and low GDP taking a toll on demand.
Like a broken record playing the same tune over and over again, one can keep on saying that the Govt needs to work and announce some sops which alone will boost sentiments and hopefully kickstart demand. But the Govt is caught in its own scams and political quagmire, surviving to stay afloat.
Surveys, though conducted over small sample sizes, is an indication of the moods on the ground. Though the GDP numbers have been indicators enough of this slow down, these surveys point out the seriousness of just where India is heading. The tailwinds show that India is cruising into a storm; unless the captain of the ship wakes up, we could hit an iceberg.