Prospects from 55.7pc investors

India will remain among the world’s fastest-growing economies for the foreseeable future with 55.7 per cent of the companies saying they will increase investment in the country, according to a business survey.

But the country’s economic growth has been revised down to seven per cent for fiscal 2017-18 (March-April), due to the demonetization impact on consumer spending, said the #Economist Corporate Network’s (ECN) 2017 Asia Business Outlook Survey.

Thirty-two per cent of the companies already in India said they will not increase investment while 2.1 per cent said they will reduce capital expenditure in the country.

The rest 10 per cent has no plans to invest.

The survey said the botched handling of the government’s demonetisation campaign will weigh on the outlook.

Announced on 8 November 2016, demonetization will have a short-term impact on the economy.

“We forecast growth of seven per cent in 2017/18 (April-March), a slight downgrade from our predemonetisation expectation, as it will take several months for economic activity to normalize,” said the survey.

“A lack of cash in the economy as a result of this policy has added significant stress in rural areas and could even result in a poor harvest in early 2017, driving up food prices,” it said.

Weakness in rural India will constrain consumer spending and affect companies in sectors such as Fast Moving Consumer Goods particularly strongly.

The legislative reform agenda of the Prime Minister, Narendra Modi, is unlikely to make much progress over the coming years as the National Democratic Alliance coalition that generally supports his policies will continue to lack a majority in the upper house of parliament, it pointed out.

“Nevertheless, our expectation is that individual states will make solid progress in enhancing the business environment and attracting foreign capital,” it said.

Overall, India along with China is positioned to remain the world’s fastest-growing major economies as private consumption and investment are expected to fuel demand for goods and services, said the survey. fii-news.com