India: According to a majority of CEOs attending CII’s National Council meeting, India’s GDP growth in the current year 2010-11 is likely to be in the range of 8.5-9.0%. While 56.4% expected this outcome, 38.5% expected GDP to grow at a more moderate rate of 8.0-8.5% and 5.1% expected an even higher rate of 9.0-9.5%. According to CII President, Mr. Hari Bhartia, “businesses are upbeat on the domestic economy despite the global uncertainties and are maintaining their investment momentum.”

On inflation, a majority of 64.1% of respondents expected the headline number for March 2011 to remain above 6.5% while 28.2% expect it to moderate to 6.0-6.5% and 7.7% expect a lower range of 5.5-6.0%. This compares to the RBI’s expectation of WPI inflation falling to 5.5% by March 2011. The RBI recently took an intra-meeting decision to hike policy rates by 25 basis points. In view of inflation remaining high and the economy reporting robust growth rates, many observers expect the RBI to hike policy rates again at the first quarter review of monetary policy . According the 92.3% of CEOs, banks would increase lending rates if the RBI chooses to hike again. This would put pressure on their margins.

The CEOs also gave their outlook for different business indicators in the second quarter of 2010-11 (July – September 2010) as compared to the first quarter (April – June 2010). A majority of 82.1% of CEOs expect capacity utilization to be higher in the second quarter while 17.9% expected it to be lower. Similarly, 79.5% of CEOs expected capacity expansion to be higher in the second quarter compared to the first.

Companies have been facing rising cost of raw materials and inputs over the past year. 89.7% of CEOs expect raw material costs to increase in the second quarter while 5.1% expect no change and 5.1% expect it to be lower. A majority of 56.1% of CEOs expect no change in their pricing power while 23.1% expect it to worsen. Pricing power is likely to improve in the second quarter according to 20.5% of respondents. “The responses indicate that while Indian companies are positive on growth, they are concerned about the inflationary environment and the impact it may have on their profitability,” said Mr. Chandrajit Banerjee, Director General, CII.

Source:http://www.cii.in/NewsRoom.aspx?enc=SO0wa+TYDvk3FXKFO1bn1Q==