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India Inc expects inflation to flare up
New Delhi, April 07, 2008
As if inflation at its highest level in about three years
was not enough, nearly two-third of executives in India
expects the rate of price rise to further flare up in the next
six months, according to a new survey.
However, this pessimism level regarding the inflation among
the Indian executives is much lower when compared to the
places like China, Europe, North America, other developing
markets and the overall Asia-Pacific region.
According to the report titled "Economic and Hiring Outlook,
First Quarter 2008: A McKinsey Global Survey," as many as 64
percent of Indian executives expect the rate of inflation to
rise in the next six month, while only 20 percent expect a
decline in the rate of price rise.
About 15 percent of Indian executives expect the inflation
rate to remain unchanged in the next six months, the survey
found.
The survey was conducted in March, presumably before the
government data showing the rate of inflation at 7 percent was
released on April 4.
According to the survey, the percentage of executives
expecting a rise in rate of inflation is less than India only
in Latin America, where 58 percent said they expected it to
rise in their country from current levels in the next six
months.
In comparison, those expecting rise in inflation were 70
percent in China, 69 percent in Europe, 75 percent in North
America, 76 percent in other developing markets and 79 percent
in Asia-Pacific.
According to the report, the executives` fears of inflation
have risen and the proportion of business representatives who
expect to be able to raise prices (of their products) has
fallen.
"Over past six months of economic turmoil, executives` fears
of inflation have increased substantially," McKinsey said.
Globally, 72 percent of respondents said they expect higher
inflation over the next six months, compared to 39 percent in
a previous survey six months ago.
For the survey, Australia, Hong Kong, Japan, New Zealand,
Philippines, Singapore, South Korea and Taiwan were also
included in the Asia-Pacific region.
The survey further stated that about 83 percent of the
respondents expect a slowdown in the us to "have a somewhat or
very negative effect on their national economies over the next
year."
In India, about 74 per cent of the executives surveyed believe
that a slowdown in the American economy would have a negative
effect on the country.
However, only 21 percent of executives report that the linkage
between their national economies and the US has tightened over
the past three years, the survey revealed.
Interestingly, about 61 percent executives in China expect
better economic performance from their country in the near
term.
According to the report, the responses were gathered in the
first half of march as the credit crisis continued to expand
and drive down stock markets across the world.
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