Fearing a slowdown in the industrial growth rate in the next six months, trade body Ficci today urged Finance Minister Pranab Mukherjee not to raise excise duties or roll back stimulus for the sector in the forthcoming budget.
Stating the business confidence index had plummeted on concerns of rising raw material costs and food inflation spilling to other sectors of economy, Ficci said, "There should be no further roll back of stimulus measures. Excise rates in particular should not be raised."
The chamber also urged Mukherjee to provide tax relief to individuals who were facing the brunt of inflation and to move ahead with the implementation of the Goods and Services Tax (GST).
The Minister is slated to unveil the budget for 2011-12 in the Lok Sabha on February 28.
The overall business confidence index, according to the Federation of Indian Chambers of Commerce and Industry (Ficci), slipped to 63.8 in the current survey from 76.2 earlier.
Ficci's suggestion, however, is in variance with that of the Prime Minister's Economic Advisory Council (PMEAC) which had made a strong case for withdrawal of stimulus and raising of excise duty in view of the economic growth rate expected to revert to the pre-global crisis level of 9% in 2011-12.
The PMEAC also said inflation could fall to 5% by June end.
Ficci's business confidence survey, however, said the confidence level of corporate India has slipped ahead of the Budget 2011-12 on fears of increasing rising raw material and manpower prices and high food inflation impacting the manufacturing sector.
"The major problem area is input cost inflation which is hitting industry hard," the survey added.
About 90% of the 296 firms participated in the survey said that rising raw materials prices were acting as a ‘negative factor’ and would impede their business performance.
Majority of the respondents said companies are increasingly facing demands for higher wages and salaries and this is complicating their cost structure further.
Over half of the respondents said "they would increase selling prices in the next six months" due to rising raw material prices.
The survey said while current demand situation appears satisfactory, the near term order book position is showing signs of some moderation.
"It seems that the successive hikes introduced by RBI in the key monetary variables (seven times since March 2010) have started impacting industry’s performance," it added.
About 53% of the firms have said that high lending rates by banks are having an impact on their operations.