Business Confidence May be Bottoming Out, Shows Business Today-C fore Survey

NEW DELHI, January 17, 2014 /PRNewswire/ --

* There is a slight improvement in confidence level of corporate India, shows the latest survey

* 88 per cent of the respondents expect the overall economic situation to improve or remain same in the January-March quarter

* Around three quarters of the 500 Indian CEOs/CFOs surveyed say overall economic conditions have largely remained same in the October-December quarter over the preceding quarter

First the good news. After slipping for two consecutive quarters, business confidence rose marginally in the October-to-December quarter on the back of a stable rupee, sliding current account deficit, and slightly higher economic growth.

The unchanged monetary stance by the Reserve Bank of India (RBI) in December also contributed in lifting the overall sentiment.       

On a scale of 100, confidence levels were reported at 48.6 for the October-December period, slightly higher than the July to September months when the confidence level dipped to its lowest point ever since the beginning of the survey in March 2011.

Some 88 per cent of the respondents in the latest Business Today-C fore Business Confidence Survey believed that the overall economic conditions have remained unchanged or improved in the October-December period. The corresponding figure for July-September stood at 74 per cent. Almost 70 per cent of the respondents expect the RBI's unchanged monetary stance to have an impact on their businesses.

The first half of the financial year 2013/14 saw business confidence plumbing new depths due to multiple factors: sharp rupee depreciation, soaring current account deficit, weak economic growth, stubbornly high consumer inflation and a fear of the US Federal Reserve tapering its quantitative easing policy.

While the overall index has improved marginally, some parameters that comprise the index have shown more-than-marginal improvement. Exports, for instance, is one sector where more than a quarter (27 per cent) of the respondents expect the demand to pick up in the January-March quarter. As much as 91 per cent respondents expect the production level to rise or remain same in the January-March quarter. Similarly, 39 per cent of the respondents foresee an improvement in the stock prices in the January-to-March quarter.

"In the first two quarters, a lot of uncertainty was there among businesses, investors and general consumers. The reason for improvement could be current account deficit has gone down and even the external factors have improved," says Mahesh Nandurkar, Executive Director at brokerage CLSA.

Aroon Purie, Editor-in-Chief, India Today Group, of which Business Today is a part of, said a new government, irrespective of which party takes centre stage after the general elections this year, will have to get down to the business of governance and help kickstart the economy sooner than later this year. "The slight uptick in confidence index in the latest Business Today Business Confidence Survey is a reflection of hope that things will change. The country can ill-afford this slowing pace of economic expansion," Purie said.

                Oct-  Jul-  Apr-  Jan-  Oct-  Jul-  Apr-  Jan-  Oct-  Jul-  Apr-  Jan-
                Dec   Sept  June  Mar   Dec   Sept  Jun   Mar   Dec   Sep   Jun   Mar
                2013  2013  2013  2013  2012  2012  2012  2012  2011  2011  2011  2011
    Overall
    Business
    confidence
    index
                48.6  48.2  48.7  54.5  53.8  52.4  49.3  55.4  52.3  56.8  64.4  74.8
    Business
    confidence
    index for
    Heavy
    Engineering 47.6  47.4  46.6  50.6  50.2  49.5  48.3  52.7  50.4  55.1  62.3  73.4
    Business
    confidence
    index for
    Light
    industry    48.1  46.8  48.2  54.2  52.3  51.9  48.7  53.2  51.8  56.3  64.1  74.5
    Business
    confidence
    index for
    Services    50.3  50.1  50.8  57.7  56.8  55.5  52.4  59.5  55.2  58.6  65.7  75.7

Business Confidence Index on a scale of 100

Business Today-C fore Business Confidence Survey, which has been capturing the mood of corporate India since March 2011, has become a bellwether of business and economic sentiment. The first survey recorded the highest-ever confidence level at 74.8.

According to the survey, the cost of raw material remains a worry for several companies with 89 per cent of the respondents expecting the costs to either go up or stay at similar level in the January-to-March quarter. Worse, more than a third (34 per cent) of the respondents expects profit growth to deteriorate in the January-to-March period.

Business confidence across all sectors has shown improvement, be it big, medium, small and micro enterprises. Siddhartha Sanyal, Chief India Economist, Barclays, says that "Economy has stabilized but not improving as yet. Expectations are building up that the economy will start to recover but it is still not clear when and at what pace the recovery will take place."

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SOURCE India Today Group