Aug 05, 2013 11:45 PM IST | Source: CNBC-TV18

Govt, India Inc must team up to boost biz sentiment: Ambit

Ashok Wadhwa, group CEO, Ambit explains, in an interview to CNBC-TV18, that the government and India Inc must team up to boost biz sentiment.

The YPO Global Pulse Confidence Index has dropped for the very first time since the survey actually began in 2009. Speaking to CNBC-TV18 about the findings of the survey, Ashok Wadhwa, group CEO, Ambit explains that levels of business confidence in China and India were the worst in Asia. He adds that the market in India may deteriorate over next six months.

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Wadhwa says that the survey indicated a drop in employment and highlighted that industry needed to start evaluating long-term potential for growth. "The government is in a state of denial and needs to be realistic when announcing initiatives. The monsoon and revival of demand are some of the positives in the gloomy investment environment."

Below is the edited transcript of interview on CNBC-TV18

Q: The picture of the global economy is not very good, especially the economies of India and China. For the first time since the launch of the confidence index in 2009 there has been a a decline in business confidence in these particular regions?

A: This survey in its fourth year. In 17 quarters, we have never seen business confidence drop in Asia. As this is a prospective survey, CEOs are talking about the next six months versus the many surveys that are talking about the current situation or the past.

This year's survey has revealed, perhaps for the first time, that Asia is losing confidence and within Asia, China and India are underperforming. What is worse from an Indian perspective is that India is comparatively underperforming even to China.

Q: Has the situation worsened only now?

A: Business confidence in India as reported by several CEOs — the survey interviews about 1,70,000 CEOs around the world —is expected to fall on expectations that the economic situation will further deteriorate in the next 6 months thereby bringing down the Indian business confidence levels lower than China.

Q: Do you expect the situation in India to deteriorate further in the pre-election year? This reveals that business, whether it is domestic or foreign, is waiting on the sidelines to figure out what kind of political dispensation it has to deal with. Is that the big drag as far as confidence is concerned over the next 6 months?

A: The survey normally requires participants to respond on four different criteria. In each of those criteria, the level of Indian business confidence seems to be falling lower and lower.

The respondents to the survey estimated a drop in sales and expressed concerns regarding contraction in demand. The survey also reveals an estimated fall in employment and a investment climate where entrepreneurs and organizations are not prepared to make any new investment. Now whether this is driven by poor policy-making or politics is anybody's guess. But I would like to believe that inaction and ineffective initiatives by the government is certainly a one of the chief causes.

Q: Do you think there is a huge disconnect now between what the government perceives the economy to be and what corporate India or rest of the world perceives the economy to be?

A: Both sides need to take a look at boosting economic growth. The industry needs to start evaluating medium-to-long term potential and take a few important measures. The government needs to announce policy and support investment. So, I would say that to some extent the government is in a state of denial and needs to get more realistic and break the logjam.

Q: Are you hopeful about the second half of the year being better?

A: There are three silver linings — the good monsoon, revival in demand and government initiative to improve the investment environment. In the long term, both CAD as well as inflation can only be resolved through greater investments in manufacturing, exports and solving supply side glitches.

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