Low consumption, capex may affect recovery: BofA-ML

Last Updated: Friday, February 22, 2013 - 18:34

Mumbai: Slowing consumption and lack of fresh capital investments may dash hopes of recovery in the Indian economy, a report by Bank of America Merrill Lynch said Friday.

While factors like rate cuts and certain reform measures taken recently are positive for the economy, politics may play a negative role, the report said.

"Overall, we feel there could be disappointments in both GDP as well as earnings," it said.

Referring to consumption demand, the report pointed out that cracks were seen on the consumption front with signs of low hiring and small salary hikes among others.

"Overall, consumption is still holding up but some cracks are showing up with lower hiring targets across a range of sectors like software, along with smaller hikes in compensation and higher inflation," it said, adding that rural consumption is also slowing down compared to last year.

What is more worrying is that there is no uptick on the investment side, it said.

"Most companies are not looking to make any significant capital expenditure. This was reflected in a common theme of weakness across companies in sectors like commercial vehicles and infrastructure to lack of new project approvals by the lenders," it said.

Accordingly, earnings growth for FY'14 would be down to 10-12 percent, as against 17 percent this fiscal.


First Published: Friday, February 22, 2013 - 18:34

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