New Delhi, Apr 28: Fears of an economic slowdown, inflation and rising costs hurt business confidence of Indian firms during October-December but majority see investment picking up in coming months, a survey showed on Monday.

The survey of 392 companies by Federation of Indian Chambers of Commerce and Industry (FICCI), showed the business confidence index declining to a new five-year low of 55.3 points in the third quarter of 2007/08, from 61.2 in the previous quarter.

On the outlook for January-June period, 38 percent of the companies predict net profit to decline while 26 percent expect higher profits, FICCI said.

About 58 percent of the firms expect higher sales, and 10 percent forecast a decline during the first half of 2008.

"India Inc is deeply concerned about the evolving economic situation with growth slowing on one hand and inflation rising on the other hand," FICCI said in a statement.

"Companies from across sectors have reported rising prices of industrial raw material as a serious concern with regard to their business performance," FICCI said.

The only silver lining was that nearly 54 percent of the firms reported that their investments are likely to increase in the coming six months, it said.

India's statistics office estimate economic growth at 8.7 percent for 2007/08, slowing from 9.6 percent in the previous year while inflation rose to a three year high of 7.41 percent in late March.

Last month, the finance minister said India is prepared to give up a bit of growth to control inflation and interest rates remain the most effective instrument to manage price pressures in Asia's third largest economy.

The central bank, which maintained a tight monetary condition in the last two years, will review its policy on April 29.