The economy is out of the cold. Business sentiment is warming up. Corporate chiefs are not only giving the new government a stable rating, they also believe that gross domestic product (GDP), industrial production and the stockmarket will gain in strength. These are the findings of a quick Outlook-CII CEOS Poll conducted among 55 chief executives of top business houses just a day after the new government was sworn in on October 14.
Political stability will make for solid growth, says the poll. About 38 per cent of the CEOS believe that the government will last between three and five years with a close 29 per cent saying it would complete the full term. Another 32 per cent feel that the government would last one to three years. Enough to put the economy on the growth trajectory.
The projections for GDP growth for the year are buoyant. An overwhelming 96 per cent of the chief executives believe that the GDP growth rate would be above 5 per cent. Further, the Sensex will remain in the 5000-5500 range, feel 63 per cent of the CEOS.
That's the good news. However, a lot of these rosy projections are based on expectations of the government carrying forward reforms firmly and swiftly. The three priority areas on which CEOS want the government to take urgent action are removing infrastructure and investment bottlenecks, cutting government spending and disinvestment. The fiscal deficit, feel 56 per cent of the respondents, is very serious. But when asked if the government will be able to cut its spending, an overwhelming 75 per cent said a thumping no.
For the economy to go on an expansion spree, an overwhelming 80 per cent feel that interest rates must be lowered. Obviously, the rose-tinted vision of the CEOS is being tempered with a reality check. Whether it is removing infrastructure bottlenecks or reducing interest rates or cutting spending, the government needs to take tough political decisions. Will Yashwant Sinha be able to deliver? Interestingly, business leaders are rating him way ahead of P. Chidambaram and only a wee bit behind Manmohan Singh on the performance chart. So far.