ASSOCHAM urges for liberal export sops to boost biz confidence

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SME Times News Bureau | 08 Apr, 2013
The government needs to get into war-footing effort as the industry and exporters are waiting for the new foreign trade policy, an ASSOCHAM survey pointed out.

Trade body, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its quick survey, released on Sunday urged for liberal export incentives so that exports remain much more lucrative than the domestic market.

This would bring us the much-needed foreign exchange and bridge the trade gap, it said.

Imports, on the other hand, are increasing at a much faster rate creating problems for the CAD which would be well above five percent of the GDP for the fiscal 2012-13. As a percentage of the GDP, the imports would be close to one-third.

Adding to the already low Business Confidence, survey said, the Business Confidence of India Inc has taken a beating in the last few weeks and more so in the last 10-12 days as the foreign institutional investors which were single-handedly keeping the capital market alive have started withdrawing posing a big question on the source of financing the country’s wide current account deficit,

The survey of 130 CEOs and CFOs indicated that the talk of early elections and unease of relationship between the Congress and the Samajwadi Party added to the confidence erosion despite Prime Minister Manmohan Singh advising the industry to shun negativity.

However, the mood among the industry has turned worse days before the earning season for the corporates kick off next week. Most of the analysts have concluded that the corporates in a host of sectors like realty, automobile, PSU banks, telecommunication and infrastructure are going to take a beating in their earnings, further damaging the market sentiment.

Even the so-called defensive sectors like the FMCG, pharmaceuticals may not enthuse investors since valuations of the companies in the business are quite high.

"The FIIs remained the single most inspiring factor in the last few months after central banks in several countries including the US resorted to quantitative easing. Quite a few of the funds found their way into the Indian and other emerging markets," the survey report found.

Thanks mainly to the capital inflows in the stock market, the gap in the current account deficit was filled in and the country did not have to deplete its foreign exchange reserves.

But going forward, the FII funds may be tricky as is evident from the trends of the stock market in the last few days when a sharp erosion of the market capitalisation was witnessed.

Prospects for the merchandise exports do not seem very promising either in the face of the US disappointing the financial markets with disappointing job data. The indicators showed that the US recovery still faces bumps with significant implications for the rest of the world.

The domestic fund raising effort has not been picking up in the market. The primary market of the IPOs has almost dried up, deposits are hard to come even in the banks and sluggish conditions in the market would also pose a challenge to the government's disinvestment programme, the ASSOCHAM survey report pointed out.

"72 percent of the CEOs and CFOs surveyed said the political situation is getting murkier and the situation is only going to get worse as we approach the elections".

The big-time reforms which could uplift the mood look distant even though measures like sugar decontrol has generated some sectoral enthusiasm.

"85 percent of the respondents said that it is possible to return to the 8-9 percent growth, but that would be quite a distant away and the country’s growth aspiration has certainly gone down. Despite government goading them, the PSUs are not willing to invest while the private sector is hard pressed for cash in any case. The emphasis in the private sector seems to be more on balance-sheet repairing than winning fresh pastures," the survey report said.