Amid the gloom and doom there may be some good news with a survey conducted by the Reserve Bank of India indicating that corporate profit growth in the current financial year may be better than estimates.
The 18 per cent rise in corporate profits after tax estimated in the latest survey of professional forecasters conducted in September 2008 is marginally better than the 16 per cent rise in the previous round three months earlier.
But even this growth is lower than the 27 per cent rise during 2007-08.
The survey findings, which were released in the Macroeconomic & Monetary Developments report on the eve of the credit policy, have, however, not explained the reasons for the optimism.
In almost all other aspects of the economy - barring inflation, where it talks of signs of moderation - the report has pointed to lower growth prospects.
According to the latest professional forecaster's survey, India's gross domestic product is expected to grow 7.7 per cent this year, compared with 9 per cent in 2007-08.
The previous survey had estimated GDP growth at 7.9 per cent.
The change in outlook is primarily due to an anticipated slowdown in the industrial sector, which is estimated to grow 7 per cent, compared with the earlier estimate of 7.5 per cent.
| What's in store |
| |
2007-08
Actual |
2008-09
Original |
Revised |
Latest |
| GDP |
9.0 |
8.1 |
7.9 |
7.7 |
| Agriculture |
4.5 |
3.0 |
3.0 |
3.0 |
| Industry |
8.1 |
8.1 |
7.5 |
7.0 |
| Services |
10.7 |
9.7 |
9.5 |
9.5 |
| Corporate PAT |
27.0 |
24.7 |
16.0 |
18.0 |
(All data for growth in %)
Based on survey of professional forecasters conducted by RBI
Original based on survey in March 2008
Revised based on survey in June 2008
Latest based on survey in September 2008 Source: RBI |
The Industrial Outlook Survey conducted by RBI for the third quarter has shown similar trends with fewer respondents estimating the overall business situation to be better.
Similarly, fewer respondents expected the financial situation to be better or production and the order book to rise.
In fact, there were more respondents who expected working capital requirements to increase in October-December this year over July-September.
At the same time only 23.3 per cent of the respondents said availability of finance will improve in the third quarter, against 30.2 per cent in July-September.
"Increasing raw material prices have added to negative sentiments of the respondents significantly. Higher input costs are expected to affect profit margins during July-December 2008 and, therefore, to protect their profit margins, more corporates may increasingly pass on the price increase to the consumers," the report said.
Image: Customers ride an escalator at Mani Square, a mall which opened in Kolkata recently. | Photograph: Deshakalyan Chowdhury/AFP/Getty Images
Also read: How to make tax gains on stock market losses
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