59% CEOs expect Budget to revive economy within a year, shows CII poll

Our Corporate Bureau

New Delhi, Jan 5: India Inc now pins its hope on the Budget 2002-03, as 59 per cent CEOs are expecting the Budget to stimulate growth and the economy to revive in the next six months to one year.

The majority of CEOs are expecting the government to take positive measures in the forthcoming Budget which will encourage investment and revive demand, according to a snap poll conducted by Confederation of Indian Industry (CII).

The respondents are expecting a revival in demand which in turn will help the economy to revive in the next six months to one year, it said.

However, one third of the respondents also felt that more than a year would be required to witness any revival in demand.

“In keeping with the expectations regarding the revival in demand, the expectations of easing off of pressure on bottomlines lags that of sales by around six months,” CII said. Quoting the outcome of the poll, CII added, “Interest rate and tax rate reduction are the two measures identified for encouraging investments.”

Over 50 per cent respondents are of the opinion that the Reserve Bank of India’s bank rate reduction has translated into a reduction in the lending rates by banks. However, the same number of respondents hold the opposite view.

Credit off-take and investments will improve with a reduction in interest rate, according to 43 per cent of respondents.

The CEOs expected a moderate to significant impact on investments if the Budget reduced corporate tax rate to 30 per cent from the existing level of 35 per cent combined with the elimination of minimum alternate tax (MAT).

A majority of respondents, however, felt that a reduction in the corporate tax rate and elimination of MAT should not be temporary measures aimed at encouraging investments, the survey said.

Predicting the future trend based on the snap poll, CII said, “The year 2002 will also see restructuring exercise by corporates, focussing on core competence.”

A small group of respondents, however, wanted to keep their diversification option open depending on suitable opportunity, it added.

According to the poll, 2001 has been harsh on both top-line as well as bottom-line companies. “However, around 40 per cent respondents reported impressive growth in bottomline despite a negative growth in sales,” CII said. Most of the companies have resorted to cost management, downsizing and waste reduction to manage the downturn, it said.