CEOs pause investments, feel hard time to invest: CII

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SME Times News Bureau | 05 Dec, 2011
A majority of the country's leading CEOs have muted investment plans both in India and abroad, reflecting the difficult environment for investments, a study said on Sunday.

"It is worrying to note that a majority of CEOs have muted investment plans both in India and abroad, reflecting the difficult environment for investments," Confederation of Indian Industry (CII) Director General, Chandrajit Baneerjee said.

According to the respondents, factors such as cost of power, environmental clearances and high cost of capital were the prime issues which were holding back domestic investment, apart from issues such as governance, discretionary powers, slowness of decision making, high transaction costs and corruption.

However, a majority of respondents felt that the new manufacturing policy announced recently is likely to improve the investment environment.

CEOs feel domestic and international investments are likely to register single digit increases or even decline in 2012.

"Only 33.3 percent of respondents expect domestic investments to increase by more than 10 percent in 2012 while 66 percent expect it to increase by less than 10 percent or to decline," said CII as per its snap poll conducted among leading CEOs of the country.

"Similarly, 32.1 percent of respondents expect international investments to increase by more than 10 percent while 67.9 percent expect it to increase by less than 10 percent or to decline," it added.

The survey has been done on the backdrop of the downturn in investor sentiment and the decline in fixed capital formation seen in the second quarter gross domestic product (GDP) numbers.

Responding to the significance of the Eurozone for the Indian economy, over 60.6 percent rated it as moderate while 33.3 percent said it was high and 6.1 percent felt it was low.

However, over 80 percent felt that the sluggishness in the western world and growing uncertainty and risk averseness are likely to have a moderating impact on India's exports, foreign direct investment and external commercial borrowings.

Over 70 percent did not agree when asked if India should contribute to the Eurozone's bailout fund.

When asked whether the trend of Indian companies investing abroad would strengthen despite the global economic turmoil, 44.1 percent of respondents agreed while 35.3 percent did not.

"While the global crisis has made Indian companies more conservative towards investing abroad, many companies will continue to expand abroad," said Banerjee.

According to the CEOs, some of the countries they are looking for investments include Malaysia, Singapore, Indonesia, US, Canada, Brazil, Britain, Germany, Austria, Nigeria, Sub-Saharan Africa, Russia and Italy.

The sectors they were eyeing included automobiles, bio manufacturing, financial services, IT services, coal, solar power, health and chemicals.