Most Indian firms do not see slump: Credit Suisse

In light of a weakening economic data, Credit Suisse has conducted a survey on 86 Indian corporates to see if they are witnessing a slowdown. Surprisingly, the survey has found out that over 60% of the corporates do not see any slowdown.

“We believe that smaller Indian firms are yet to admit their problems. Moreover, strong demand is no longer given for corporate India – weakening demand is the biggest contributor to the slowdown. We believe that this is important for policy makers – weak demand is real and needs addressing effectively,” said Credit Suisse in a report based on the survey done on Indian corporates.

The report highlighted the fact that inflation in the short term was bound to persist.

“Over the near term, Indian corporates expect an improved business environment after inflation cools. However, over the longer term, Indian firms see slowing economic growth as the biggest risk to their business models (35% of all corporates). We conclude inflation is a short-term concern. However, the biggest underlying business risk remains economic growth,” said the research.

The research also throws light on the supply constraints in India, which have been the greatest problem for Indian corporates.

“Weakening demand is a concern. Typically, supply constraints have been the biggest problem for corporate India, with demand almost a given. However, the top concern for corporates is demand weakness, for 44% of all corporates, 90% of corporates facing a slowdown. Inflation, interest rates, economic slowdown and consumer spending are the concerns on the demand side.?

On the supply side, few firms talked of hindrance from lack of funds – this could be a risk if slowdown persists,” said the report.

Typically, infrastructure bottlenecks and supply-related constraints, manpower and raw materials have been the biggest problems for corporate India in the past few years. For many, demand was almost always a given and on a steep rising path, they said.

The survey showed that the slowdown is largely from the demand-related rather than supply-related factors. In fact, there is a near consensus among the companies witnessing a slowdown for the same reasons – nearly 90% of the companies feel weakening demand is the reason.

“Although inflation could be indirectly linked to all these factors, the fact remains that economic slowdown and consumer spending are beginning to worry Indian corporates,” the report said.