Saturday, January 28, 2012

World Economic Forum- Confidence in India fading?


Source: AIESEC

EconomicTimes has an interesting story on the business confidence among Indian CEOs changing. It reports two key observations:

1. According to PricewaterhouseCoopers' latest global CEO survey, India as dropped to fourth place, behind China, the United States and Brazil as the country that 1,258chief executives across the world feel is most important for their overall growth prospects.

2. Confidence among Indian CEOs about their own prospects in the next year is still at 55%, down from a staggering 88% last year according to PwC's global survey.

The first point comes to me as a surprise. Yes, China and United States will continue to be important for business. But between Brazil and India, I believe India has had a better growth story. The 2012 forecast for Brazil is to grow by about 2.5% compared to about 7% for India. Also, the Brazilean Real and the Indian rupee both witnessed in excess of 15% depreciation in the last 6 months. One of the things that could explain this new order of preference is the series of corruption scandals and demostrations in India during 2010-11. This clearly has sent a wrong signal to the investor community. This is not to say that there is no corruption in Brazil. Yes, there is corruption, but it may not be at the same level and so openly talked about.

The second point is also difficult to understand. Nothing much (expect for 1% of GDP rate) has been lost since last year around the same time. The inflation is at similar levels and the rupee ofcourse has depreciated significantly. This should come as good news, especially to exporters. Yes, the global outlook has turned more gloomy and this would have definitely made an impact on India's prospects as well. Actually, I would imagine that a significant percentage of people who didn't vote for India would be in Industries which are impacted more by global economy than the domestic economy.
Just a few thoughts...

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