Indian eco confidence slips in May on weak rupee, inflation

Sliding rupee, high inflation and slow growth hurt the confidence among Indians on the economy in May compared to the previous month, says research firm Ipsos.

Against the backdrop of overall sluggishness, Ipsos said there are hopes that Prime Minister Manmohan Singh, who has taken charge of the finance portfolio, would take initiatives to bolster investor sentiment.

According to the Ipsos Economic Pulse of the World Survey, economic confidence among Indians declined by 2 per cent to 70 per cent in the month of May over the last month. However, India continued to retain the second most economically confident nation title after Saudi Arabia, which tops the table with a wide margin at 88 per cent last month.

"The symptoms of Indian economy being in poor health are building fast with growth rate slipping to a nine-year low of 6.5 per cent in 2011-12, current account deficit touching a high of 4 per cent and inflation at a high of 7.55 per cent in May.

"Rupee has plunged sharply in recent weeks especially on account of foreign fund outflows and gloomy investor sentiments. It has lost over 20 per cent against the US dollar over the past few months," Ipsos India MD Mick Gordon said.

Infrastructure problems, shortage of skilled labour, government expenditure on inefficient subsidies and a proposal for punitive retrospective taxation on foreign companies, among others, have added to already slowing growth, he added.

"Now hopes of revival are pinned at Manmohan Singh, Prime Minister of India who is looking after the finance portfolio. He is expected to bring in changes to revive the stalled economic growth, arrest the rupee's fall and deal with the fallout of a possible breakup of the euro zone, a tough task," Gordon said.

On Wednesday, the Prime Minister called for initiation of steps to reverse the climate of pessimism and revive investor sentiment. Meanwhile, the survey found that citizen confidence was highest in Saudi Arabia stood at 88 per cent followed by India (70 per cent), Germany (69 per cent), Sweden (64  per cent) and China (63 per cent).

The survey was conducted in April 2012 among nearly 19,000 people in 24 countries including India, the US, Australia, the UK, China and Brazil. The study, which examined citizens' assessment of the current state of their country's economy, said the overall global average economic confidence was down by one point to 37 per cent in May -- the lowest since the economic downturn of 2009.

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