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Last Updated : Jan 09, 2020 10:35 AM IST | Source: Moneycontrol.com

US-Iran conflict will impact economy, says India Inc. But confident of business going forward

In a Moneycontrol CEO opinion poll, most chief executives believe their businesses won't be impacted by the crisis in the Middle East, unless it escalates


India Inc’s chief executives are keeping a close track of developments in the Middle East, where tensions between Iran and the US have kept the global economy on tenterhooks.

While three-fourth of top executives fear that tensions will impact the world economy and India adversely, a majority of them continue to affirm that their businesses will not be impacted, at least not yet.

In a quick opinion poll that Moneycontrol conducted among CEOs and MDs across sectors including auto, financial services, banking, aviation, retail, pharmaceuticals and steel, 68 percent said the crisis could delay a possible recovery in the Indian economy.

Close

“If the global uncertainty impacts our markets, it will also impact equity fund inflows,” said a senior executive from the financial services industry. “Such things do have repercussions on India and so our FY21 outlook will also be revised,” he added.

Some concerns were assuaged late on January 8, when both US and Iran seemed to have stepped back, a bit, from their brinkmanship. US President Donald Trump claimed that Iran’s strike on US bases in the Middle East haven’t harmed its forces and seemed to back away from a further escalation.

On January 9, the market also breathed a sigh of relief, with the Sensex up 450 points in early trade.

The poll
Moneycontrol asked the chief executive officers five questions.

- Will the escalation between the US and Iran impact Indian economy? Three-fourth of them replied yes.

- Will the crisis worsen the economic condition, globally? Again, three-fourth of them answered in the affirmative.

- Will it delay the recovery of Indian economy? This time, the majority percentage dipped to 68 percent, a hint that top officials were more sanguine about the Indian economy.

- Do the worsening ties impact your business? The opinion was pretty much divided. Fifty six percent CEOs said their businesses won’t be impacted. Around 32 percent said the crisis will impact their operations. The rest said they needed some time to understand the impact.

- Will the situation impact your outlook for FY21? A majority of them -- 57 percent -- thought so. But again, nearly 40 percent said the situation was not bad yet for them to revise their outlook for FY21. The rest were undecided.

Opinion

Interestingly, a few of the chief executives were confident about the resilience of the Indian economy. “Apart from the impact due to possible fuel price surge (short term maybe), we are quite stable as an economy,” said a CEO of an aviation company.

Another said, “I feel that these attacks are short term show of one upmanship. It may not last long, but a certain booster to sagging petro dollars in the Gulf.”

Yet another chief executive looked back at history to make an interesting note. “Sometimes wars jump start world economy. (Remember the cure to largest financial crisis in the world was World War II). Unfortunate, but wars create demand after a temporary blip!”

Timing

The Middle East crisis couldn't have come at a worse time for India Inc.

Nobel Laureate Abhijit Banerjee recently said the Indian economy could be at a tipping point of a major recession. The government’s estimate of 5 percent growth in 2019-20, an 11-year low, has also increased the nervousness.

The next few weeks would be keenly watched. India Inc will begin to report its third quarter earnings, and come February, Finance Minister Nirmala Sitharaman will present the Union Budget.

(With inputs from Viswanath Pilla, Himadri Buch, Swaraj Baggonkar, Dinesh Unnikrishnan, Parnika Sokhi & Prince Mathews Thomas)

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First Published on Jan 9, 2020 10:35 am
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