Over a third of Indian firms see worse ahead - survey

A man walks past a building reflecting the construction of other buildings in Mumbai in this March 20, 2007 file photo.

NEW DELHI (Reuters) - Over a third of Indian corporates expect the economy and their industries to worsen in the coming six months, a survey released on Monday showed with results that improved on those from a quarter ago.

The Federation of Indian Chambers of Commerce and Industry's (FICCI) quarterly business confidence index rose 6.2 points to 44 for the March quarter, rebounding from a seven-year low in the prior quarter, the survey of 384 firms showed.

Weak demand was the most frequently cited reason for faltering corporate performance, but 40 percent or more said higher costs of raw materials, staff and credit were also hurting companies, the business lobby's survey showed.

India's economy is expected to grow around 7 percent or less in the year to March 31, compared with 9 percent or more growth seen in the preceding three years. Some private economists have said the following year could see growth as low as 6 percent.

The government has announced spending plans, cut factory gate taxes and the central bank has cut interest rates to a nine-year low, in measures to revive the economy.

FICCI said the proposals announced by the government, which is headed for polls in April, had to be implemented and there could be a need for further stimuli.

"This is all the more important as survey participants have pointed that it is the current situation that is somewhat better but they are not too confident about the future," FICCI said in a statement accompanying the survey.

The survey showed 38 percent of firms expected the economy and their industry's performance to "moderately or substantially" worsen over the next two quarters. In the December quarter, close to half saw them worsening.

A quarter of the respondents saw better industry performance, compared with 23 percent a quarter ago. Improving economic conditions were presaged by 30 percent, up from 22 percent earlier.

Over the next six months, profits would decline, over half of the surveyed firms said, while 31 percent also predicted a decline in sales. Forty percent saw lower levels of investment.