The domestic industry expects gross domestic product (GDP) to grow at 8 per cent in the current fiscal year, mirroring a drop in confidence among the country's business community about the economy's overall prospects, a latest survey by the Confederation of Indian Industry (CII) showed.
CII's 74th Business Outlook Survey (BCI) for October-December quarter based on responses of 150 firms showed that the Business Confidence Index (BCI) is lower for the manufacturing and services sector
BCI, which measures entrepreneurial optimism, for October-December 2010-11 fell by 1.4 points to 66.2 from 67.6 in the previous quarter.
"The lower business confidence for the services and manufacturing can be explained by the growing concern on the inflationary condition and the tightening of monetary policy that is likely to affect the availability of credit," the survey said.
The recent US policy development that intends to cut tax incentives to American companies that outsource jobs is also likely to affect the domestic services sector, given that 61 per cent of India's IT-BPO exports are towards the US, the survey said.
The survey identified inflation and high interest rates as the main concerns.
"These results are consistent with the fact that the overall high inflation is likely to make domestic consumers frugal and hence affect demand, while a slump in the global growth rate in the later half of 2010 is likely to hit global demand," said Chandrajit Banerjee, director general, CII.