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Survey anticipates robust growth in the Indian service economy


The spring 2008 KPMG Business Outlook Survey, which surveys around 1,400 service sector firms across the BRIC region (Brazil, Russia, India and China), highlighted continued confidence regarding business prospects for the next twelve months.

Perhaps surprisingly, panellists reported that the availability of credit to their companies had improved compared with the situation prior to the financial market turmoil which commenced last summer. Approximately 38% of companies stated that this was the case, with only around 8% of firms noting a deterioration in credit availability and just 2% reporting that their business was being constrained as a result.

However, the cost of credit was widely reported to have risen since the start of the credit crunch, with 47% of companies signalling higher borrowing costs and less than 8% noting a decrease.

NATIONAL SURVEY FINDINGS- INDIA

Robust growth is anticipated in the Indian service economy over the coming twelve months, according to the latest BRIC Outlook Survey. Over 60% of service providers the highest of all four BRIC countries expect an increase in levels of business activity.

Growth of activity is expected to be supported by an anticipated strong rise in volumes of incoming new business. Approximately 56% of all companies forecast an increase in new work, while none expect a fall.

Revenues are also set to rise markedly, underpinned by increased marketing activity, the introduction of new products and entry into new markets. Around 58% of companies expect growth of revenues during the coming year. This is despite widespread concerns over intensifying competitive pressures in the Indian service sector.

Service companies remain optimistic about future profit levels higher profitability is anticipated at just under 58% of firms. Increased revenues and profits are set to support rising levels of capital expenditure.

Commenting on the survey findings, Russell Parera, CEO , KPMG in India said, The current optimism reflects the unique positioning that India has with its large domestic market, off shoring service capabilities and economic value drivers.

Staffing levels are set to rise strongly, with around 41% of panellists forecasting an increase in employment. Despite the resultant likely increase in capacity, companies also expect a greater amount of work to be outsourced.

Inflation of input costs is set to accelerate substantially over the coming year. Almost 43% of firms expect a sharper annual rise in input prices, with salaries, outsourcing costs and raw materials all set to be sources of inflationary pressure.

Reflective of robust demand, firms expect to retain a significant degree of pricing power, and expect to pass on much of the increase in their costs to customers in the form of higher charges. Around 40% of companies forecast a faster annual rise in tariffs over the next twelve months.

(This is press release of KPMG)

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