India Business Confidence Firms in October
Cost of Debt Service Hits Record Low
MUMBAI, India, Oct. 27, 2015 /PRNewswire/ -- The latest rate cut by the Reserve Bank of India helped to push business sentiment slightly higher in October, although most activity indicators in the survey eased on the back of weaker demand.
The MNI India Business Sentiment Indicator, a gauge of current confidence among BSE-listed companies, rose to 62.3 in October offsetting last month's fall to 61.4. The rise in sentiment was observed across both manufacturing and construction companies, while sentiment among service sector companies fell for the fourth consecutive month.
Confidence has increased four times this year, each time following a rate cut by the RBI. While sentiment rose in October, it was less than expected given the greater than forecast 50 basis point cut in rates, with respondents more concerned about the general malaise in the economy and subdued demand globally. Moreover, this month's result was even more disappointing given that this is a festival period when usually there is more business and purchase activity.
Panelists reported that weak global growth continued to hurt demand. Export Orders were 8.4% below the series average while New Orders were 13.1% down on the year. Production growth also moderated between September and October.
The decline in global commodity prices led to an easing in raw material costs for the fourth consecutive month in October. Some companies, however, raised their prices to increase their margins and also make up for previous cuts in selling prices.
While output and orders have eased, there were clear signs that the four rate cuts since the start of the year were starting to flow through in the form of cheaper and more plentiful credit. The cost of debt service has fallen dramatically since the start of the year and hit a record low this month and subsequently the availability of credit has improved.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, "The general sogginess in production and orders continued through to October with both now significantly down from levels a year ago. Of clear concern is the softness in export orders with India not immune to weakness in its key trading partners."
"Monetary policy has been loosened considerably over the past year and firms are clearly starting to see the benefits of that coming through. This should help to underpin demand ahead, although for now there are few signs of a turnaround."
Notes to Editors
Please source all information to MNI Indicators.
MNI India Business Sentiment is a monthly poll of Indian business executives at companies listed on BSE (formerly known as the Bombay Stock Exchange). Companies are a mix of manufacturing, service, construction and agricultural firms.
Respondents are asked their opinion on whether a particular business activity has increased, decreased or remained the same compared with the previous month as well as their expectations for three months ahead, e.g. is Production higher/same/lower compared with a month ago?
Diffusion indicators are then calculated by adding the percentage share of positive responses to half the percentage of those respondents reporting no change. An indicator reading above 50 shows expansion, below 50 indicates contraction and a result of 50 means no change.
Data is collected via telephone interviews. More than 400 companies are surveyed each month. The survey has been in place since November 2012.
About MNI Indicators
MNI Indicators, part of Deutsche Börse Group, offers unique macro-economic data and insight to businesses and the investment community. We produce data and intelligence that is unbiased, pertinent and responsive. Our data moves markets.
For more information, visit our website at www.mni-indicators.com.
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