Most Indian CEOs expect the rupee to strengthen against the dollar, interest rates to fall marginally or be stable and consumer demand to improve in 2008, according to a survey of 118 CEOs conducted by Business Standard.

A majority of the CEOs polled said the emerging political situation at the Centre could derail the pending economic reforms agenda (nuclear power, foreign direct investment in retail, etc).

A sizeable chunk also expressed concern that social unrest against large industrial projects could rise in the coming year.

Overall, inadequate infrastructure development, the rising rupee and the impending global slowdown were mentioned as the top concerns that could pour cold water on the Indian growth story.

The poll was conducted in December throughout the country and included big and small firms from all major sectors including metals, automobiles, information technology, engineering, hotel and tourism, real estate, aviation, pharmaceuticals, financial services and consumer durables.

In line with 2007 trends, 102 of the 118 CEOs (86.4 per cent) said the rupee would gain against the dollar in 2008.

Sixty four said the rupee would touch 38 against the dollar by December 2008, 25 put the number at 37 and two said it could climb to 36 against the greenback.

 In other words, these CEOs expect large capital inflows to continue, driven largely by higher interest rates here, which will drive down the dollar.

Seventy CEOs (59.3 per cent) said interest rates, which hold the key to capital inflows, would soften in 2008, while 34 (28.8 per cent) said rates would be stable.

While 24 said rates could soften by 50 basis points, 20 said the fall could be as much as 100 basis points. Nine felt the fall could be steeper � 150 to 200 basis points.

"We expect interest rates to soften by at least 100-200 basis points. It looks like interest rates in the economy have peaked out," said Infosys Technologies [Get Quote] Managing Director & CEO Kris Gopalakrishnan.

The coming year will be the last before the next general elections. With the drubbing it received in Gujarat, the United Progressive Alliance (UPA) is expected to intensify its efforts to control prices.

With most commodity prices including cement, steel, wheat, sugar and pulses expected to rule firm in 2008, the government is likely to favour a tight monetary policy to keep prices in check.

Still, 83 CEOs (70.3 per cent) said they expect consumer demand to be higher than in 2007 and 23 (19.5 per cent) said it would be at the same level.

"With rising disposable incomes and burgeoning middle class, consumer demand is only expected to rise," said Malvinder Singh, CEO and managing director, Ranbaxy Laboratories [Get Quote].

Unlike China, India's growth is driven by domestic demand and not exports. Thus, Indian companies can be expected to report good numbers in the coming year too.

What could help consumer demand is the award of the Sixth Pay Commission for 33 million central government employees likely to be implemented in 2008.

Putting more disposable income in the hands of these employees could help the UPA gain some brownie points. Otherwise, said 62 CEOs (52.5 per cent), the Centre is unlikely to take steps that could be turned into a political controversy by its rivals or its Left allies.

The casualties expected are the Indo-US civilian nuclear deal and further opening up retail for foreign direct investment. Next generation economic reforms are expected to be put on the backburner till the next elections.

"There will be some moderation in reforms. Whether it's the present government or some other government, there will be some moderation," said Deepak Khaitan, executive vice-chairman and managing director, Eveready Industries India [Get Quote].

In the run up to the elections, though a majority (63 or 53.4 per cent) said there wouldn't be large-scale unrest against industrial projects, a sizeable number (48 or 40.7 per cent) expressed fears there could be a rise.

Most of the protests in 2007 were against land acquisition from small farmers and tribes for factories and special economic zones. Clearly, many CEOs are apprehensive that the problem is far from over.

That apart, CEOs of manufacturing companies said the state of the country's infrastructure would be the biggest hindrance to growth in 2008.

"Slow infrastructure development and high interest rates could have a slowdown effect on the automotive industry," said Arvind Mathew, president and managing director, Ford India.

Export-dependent software, pharmaceutical and services firms felt the US slowdown and the rising rupee could spoil the party.

Three CEOs said shortage of talent would be the biggest stumbling block. Ten said nothing would stop their march.