Business confidence of India inc. Hits two-year low

Business confidence of India inc. Hits two-year lowAccording to the latest business confidence survey by the Federation of Indian Chambers of Commerce and Industry (FICCI), business confidence of India Inc. has hit a two-year low on rising cost of capital.

This was primarily because of aggressive monetary tightening by the Reserve Bank of India (RBI) and weak domestic demand amid fears of recession in the US and some European countries.

From in.finance.yahoo.com:

The RBI has hiked key policy rates 11 times since March 2010. In its latest monetary policy review last month, the RBI hiked key policy rates by 50 basis points.

At the global level, with both the US and the Eurozone countries reeling under a fiscal crisis, there were growing apprehensions about the world economy entering into another recession, it said.

The report said that interest rates charged from surveyed firms by their banks for both working capital loan and term loan had increased appreciably over the last six months.

While the average interest cost for working capital loans had gone up from 11.6 percent to 13.1 percent, the average interest cost for term loans had gone up from 11.2 percent to 12.6 percent, it said.

On the issue of impact of another round of interest rates hike on companies’ near-term investment plans, 44 percent of the respondents said it would have a ‘serious’ impact on their investment plans, while 36 percent said it would have a ‘moderate’ affect.

‘At the domestic level, rising interest cost and weak domestic demand, both in part attributable to the contractionary monetary policy pursued by the RBI, are taking toll,’ the survey said.

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