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62% industry leaders optimistic about economic growth in 2023, down from 78% last year: Deloitte

According to Deloitte’s survey, industry leaders say global economic slowdown, geopolitical tensions, & supply chain disruptions can pose challenges to India’s growth rate.

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New Delhi: Sixty-two per cent of India’s corporate leadership is optimistic about economic growth in 2023 surpassing 6.5 per cent, a recent survey shows — a figure that’s down from 78 per cent in last year’s survey.

Released on 16 January — merely two weeks before Budget 2023 —  the survey by Deloitte Touche Tohmatsu India saw the participation of 181 CXOs across 10 industries in India. 

CXO is a term used to describe corporation executives in leadership positions. 

More than half of the respondents in 9 of the 10 sectors that participated in the survey were optimistic about growth surpassing 6.5 per cent. It was only in the food processing sector that 53 per cent believed that growth would be below this level.

The survey cites global economic slowdown, aggressive monetary tightening to control inflation, and geopolitical conflicts as being “the biggest challenge impacting India”. 

Overall, 54 per cent of the respondents felt that the global slowdown would pose an impediment to growth in India, while 46 per cent felt currency fluctuations would do the same. The other global factors of concern include supply chain delays and geopolitical instability. 

Looking at domestic factors, 50 per cent felt that inflation could slow growth, while 40 per cent said that a mismatch between the demand for certain skills and their supply would be a problem.

“While globally integrated sectors such as BFSI (Banking, Financial Services, and Insurance), automotive, electronics, and chemicals, are more concerned about the global slowdown and currency fluctuations, geopolitical instabilities worry commodity-based sectors such as energy, food, and materials,” the report said. 

The survey also found that an overwhelming proportion of industry leaders (90 per cent) felt that the government’s Atmanirbhar Bharat push was effective — although this figure was marginally lower than the proportion in the last survey (91 per cent).

In what can serve as valuable inputs for the government for the upcoming Budget, the survey also found that only 70 per cent of CXOs felt that the government’s Production-Linked Incentive (PLI) schemes were outright beneficial. This was in comparison to 25 per cent who felt they were having a neutral impact and 5 per cent who said they were not helpful. 

In addition, industry leaders also enumerated a number of ways in which two of the government’s major manufacturing pushes— Atmanirbhar Bharat and the PLI schemes — could be improved.

Also Read: End subsidies, handouts — what Budget 2023 must propose to bring deficit down to below 6%

Expectations from major schemes

Industry leaders believed that strengthening the supply chain would help the Atmanirbhar Bharat.  

“Developing strong supply chains is expected to be the most important measure for strengthening the Atmanirbhar Bharat Programme — 82 per cent of energy and 80 per cent of electronics manufacturing respondents emphasise this,” the report said.

According to the survey, more than half of the respondents believed that “streamlining administrative procedures and easing compliance requirements” would boost the initiative. Other steps proposed by a majority of the respondents included easing clearances to boost foreign direct investment.

A majority — around 70 per cent — of the respondents highlighted that the various Production Linked Incentives Schemes have been beneficial for the growth of their sector, the report said. 

“Further, 59 per cent of the respondents advocated that extending these incentives for additional years would facilitate and increase their production capacity — 71 per cent of food processing and 70 per cent of telecom and technology respondents expected an extension.”

Most of the respondents across all sectors, except electronics manufacturing and energy, recommended broadening the scope of PLI programmes to include other sectors.

Demand-supply mismatch of skills

Another factor of importance for the Budget was that the survey found that the emerging and skilled-intensive sectors are the ones most concerned about “labour-skill mismatches”.

More than half of the respondents in the electronics manufacturing (53 per cent), life sciences and healthcare (56 per cent), and telecom and technology sectors (55 per cent) said that the mismatch between the demand and supply of skilled labour is an impediment to the growth of their industries. 

Despite this, the survey showed that 73 per cent of respondents were optimistic that Budget 2023 would be supportive of growth in their sectors amid the downside risks they face this year, the report said.

This is a sharp improvement over the previous year, where 55 per cent indicated such sentiments in 2022. it said.

“Amongst the sectors, electronics manufacturing (88 per cent), capital goods (85 per cent) and textiles (80 per cent) are most positive and hopeful of the upcoming budget, followed by food processing (76 per cent) and BFSI (74 per cent),” the report added.

What the industry wants from Budget 2023

Additional tax incentives were among the top three expectations from the Budget, with 49 per cent of the respondents saying these would “act as an impetus” for their sectors. 

The other significant expectations included accelerated credit support (40 per cent) and simplification of the capital gains structure (38 per cent).

The survey results also seem to imply optimism over the recent free trade agreements which India has signed and over trade deals in general.

“India is aggressively pursuing free trade agreements, recently finalising those with Mauritius, the UAE, and Australia after a gap of 10 years,” the report said. “Further, an agreement with the UK is also on the way.”

Respondents are optimistic about the role these treaties will play in “creating a market, improving their position in GVCs (global value chains), and attracting foreign investments”, the report said 

“These treaties will also help domestic firms get access to emerging technologies. All these will help in improving exports. Higher numbers of respondents from BFSI and automotive sector hoped for better exchange of technologies,” it said, noting that respondents were “divided” about whether trade treaties would have an adverse impact on the growth of Micro, Small, and Medium Enterprises, or MSMEs. 

(Edited by Uttara Ramaswamy)

Also Read: It’s time to end Budget secrecy, deal final blow to India’s colonial hangover


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