High interest rates and infrastructure bottlenecks dampened the business confidence of corporates in the October-December quarter, a survey by CII has said.
According to CII's quarterly Business Outlook Survey, the Business Confidence Index (BCI) for October-December declined to 49.9 from 51.3 in the previous quarter (July-September).
"Majority of respondents rated domestic economic developments, high interest rates, infrastructure bottlenecks and institutional issues among the key concerns," it said.
The fall in the index is an indication of weak business sentiments and is a matter of concern which requires concerted policy intervention, CII Director General Chandrajit Banerjee said.
While reform measures undertaken by the government in the recent months will surely start yielding results, it is important that momentum on reforms is not lost, CII said.
Corporates participated in the survey said that reform measures announced by the government would have a positive impact on investments, even though the impact on output may take some time to take effect.
"Majority of firms expect the GDP growth in the current fiscal to remain subdued in the range of 5.5 - 6%," it added.
The survey also indicates continuing elevated trend in inflation and fiscal deficit in the remaining period of the current fiscal.
"Majority of the respondents expect WPI-based inflation for the current fiscal to end up as high as 7-8%, much higher than RBI's comfort level. The fiscal deficit is expected to be in the range of 5.5-6% of GDP, way higher than the revised government target of 5.3 per cent for 2012-13," it said.
Further, it asked the government to increase the deprecation rate on plant and machinery from 15% to 25% for 3 to 5 years besides encouraging PSUs to use their cash reserves to build new capacity, exempts SEZ from MAT, fast tracks 50 mega industrial projects.