What is worse is that 52 per cent of the 524 CII members surveyed, which covered a cross-section of various industrial sectors, foresees lower profits in the second half ending March 1999, while 34 per cent expects the current trends to continue. Barely 14 per cent expects profit margins to improve.

The survey revealed that barely 16 per cent of the companies surveyed are optimistic about the general business prospects in the second half while as many as 47 per cent of the respondents are pessimistic (compared to merely 19 per cent in the last survey) and 37 per cent expect the present trend to continue.

The ranks of pessimists in the industry has swelled from 19 per cent in the previous to 47 per cent while the optimists have plummeted from 38 per cent to 16 percent.

Poor demand was reflected in the high inventory levels. Nearly 37 per cent of the respondents reported high investory levels during the six months ended September 1998 while 36 per cent reported the same levels of inventory and 27 per cent saw lower levels.

Thirty nine per cent of the companies surveyed expect the inventory levels to remain stagnant while 34 per cent have forecast a decline while 27 per cent expect higher inventory levels.

On the sales front, 35 per cent of the respondents foresee lower sales during the second half, 26 per cent foresee higher sales and 39 per cent expect the present trend to continue. Lack of demand is also reflected in the survey with only 15 per cent of the respondents reporting an increase in demand for their products.

In the first half, as many as 45 per cent of the companies surveyed reported lower sales, 40 per cent stagnant and merely 15 per cent said sales were higher.

The corporate sector predicts an end to the three-year reign of stability on theprices front. Only 59 per cent of the respondents expect the inflation rate to be within the five to 10 per cent as against 86 per cent in the previous two surveys. Over 40 per cent expect the inflation rate to cross 10 per cent.

The scenario on the production front is also disappointing. Thirty eight per cent of the respondents forecast a production growth of upto five per cent while 21 per cent foresee a growth of between five to 10 per cent. Merely 17 per cent said that the production growth would be higher than 10 per cent and 24 per cent of the respondents forecast a negative growth.

Of the 461 respondents from the manufacturing sector, only 28 per cent achieved a capacity utilisation of over 80 per cent while 35 per cent said the utilisation was between 61 to 80 per cent. Nearly 30 per cent of the respondents said that capcity utilisation was between 41 to 60 per cent.

Major infrastructure bottlenecks identified in the survey are power (26%), roads (25%), ports (21%), railways (13%), telecom (8%)and airways (7%).

However, there is some optimism on the export front. According to 257 responding exporters, about one third reported an increase both in terms of value and volume in the past six months. Forty per cent of the respondents are optimistic about export prospects in volume and value terms during the second half current fiscal.

INSIGHT
Feel-good stuck on the runway

Investment growth appears to be slowing down despite evidence of an improvement in capacity utilisation, reflecting pessimism on prospects of profit margins. For the last six months, 67 per cent of CII's respondents reported lower profit margins. In the coming six months, 52 per cent expect lower margins and 34 per cent forsee stagnation; optimism is confined to 14 per cent of the respondents. Sinha's `feel-good' factor has yet to take-off. But post-harvest rural demand together with the promised post-monsoon increase in public expenditure on construction could change expectations by December.