Indian industry fears full-blown crisis next year

NEW DELHI, Dec 26 (ANN): Industry's worst fears are coming true. There is an increasing apprehension amongst Indian corporates that the current global meltdown might snowball into a full-blown crisis and last at least till the end of 2012. A majority of 83 per cent of the respondents to a Ficci survey on the issue share this view of a long and arduous road ahead for the Indian trade and industry. The Ficci survey on the global meltdown and its impact on the indian industry reveals that the uncertain economic outlook has also resulted in Indian corporates (50 per cent of the respondents) holding on to higher cash balances. An increase in cash balances typically implies that corporates are holding on to their investment plans for better future opportunities. Alternatively, when credit is scarce, or expected to be scarce, firms hold on to more cash to meet any potential eventualities. Interestingly, nearly 82 per cent of the 50 per cent respondents are large corporates. This trend is akin to FY 2003, when the economic outlook was also uncertain in the aftermath of the 2000 dotcom bust and the WTC attack. Within the sample, sectors like metals, cement, food & beverages reported the maximum increase in cash balances. It is also possible that monetary tightening cycle that started in March 2010 has resulted in sectors like construction beginning to feel the pinch. The respondents include member associations of Ficci and individual companies and the survey was conducted in September and October 2011.