'Economy to improve, private investment a concern'

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SME Times News Bureau | 25 Jan, 2016
The Indian economy is expected to improve in six months but private sector investments will be a matter for concern due to sluggish capacity utilisation and pressure on corporate earnings, the Assocham said on Sunday.

According to an Assocham-Bizcon survey, the sales are expected to pick up in the next six months, though earnings and investments will stay muted.

"India Inc. hopes to see better sales volume and improved capacity utilization in the next two quarters but does not expect any uptick in investment and corporate earnings even as the overall macro situation would change for better," the Associated Chambers of Commerce and Industry (Assocham) said here citing the survey.

Nearly 63 percent of the survey respondents felt "the state of economy would be better in the coming six months".

However, the survey found lack of investment appetite in the private sector in the backdrop of lower capacity utilisation, excess supply and continuous pressure on profitability.

In terms of the domestic investment, 58.3 percent respondents felt there has been no change in the investment plans at the level of individual companies.

"Thus there seems to be a continuing lack of appetite for new investment in the private sector," the survey said.

Going forward, the sentiment appears to remain muted, with 62.5 percent of respondents saying that the January-March quarter of 2016 would not see much change in investment levels.

As many as 41.7 percent of respondents felt there was a decline in sales volume during October-December 2015 and expected better volumes during January to March 2016, while 45.8 percent expect their sales volumes to increase in future.

On the future of capacity utilisation, 66.7 percent said the industry will be engaged at higher levels.

"Global deflationary situation creeping into India in several sectors is hitting investor sentiment. The consumer confidence can return only if there are more job opportunities through higher investment into productive areas of the economy like construction, infrastructure and manufacturing," Assocham secretary general D.S. Rawat said in the statement.

"The lead has to be taken by the government which has an onerous task before itself along financial sector regulators like RBI and SEBI to ensure investor confidence in the markets which can then feed the investment climate," he added.