LOSING FAITH

Companies don't expect a stable business environment in the July-September quarter

basis. There could be some pressure on prices of certain high- end segments of consumer durables and automobiles,” says Barclays’ Sanyal.

Respondents are expecting improvement in the cost of external borrowing and cost of raw material. Some 72 per cent respondents hope that cost of external finance will remain low in the next three months, much like in the previous survey.

In the last credit policy in June, the apex bank kept the repo rates unchanged at 6.25 per cent for the fourth consecutive time, taking a cautionary stance on inflation. But with inflation, both WPI and CPI, softeFning, there’s a strong case for interest rate cut in the next policy. “The bank deposit rates have come down sharply that can lead to lower lending rates. Interest rates will remain low with bias towards downward revision,” says Joshi.

Fifty per cent respondents believe that cost of raw materials will go down in the July-September period – in the last survey only 34 per cent thought so. “This is not completely inconsistent. The crude oil prices have come down again. The commodities haven’t picked up as they were expected to,” says an analyst.

As a supplement to the BCI survey, we carry out an assessment of other indicators of economic growth. These include macro-economic conditions such as exports-imports data, IIP, and consumer price inflation ( CPI). All these indicators have registered a decline in recent months. The CPI index, which is closely watched by the RBI, pummelled to 1.54 per cent in June from 2.18 per cent in May due to lower food prices. The drop in imports – 4.11 per cent – in June was more pronounced than the drop in exports – 1.84 per cent – in the same month.

The fourth quarter earnings remained subdued for corporate India; the sentiment over the next few quarters will largely be determined by the implementation of GST. ~