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Indian business confidence softens

Staff Writer | March 14, 2018
The level of business confidence among private sector companies in India slightly weakened in February, with activity, new business, profitability and employment all forecast to increase at slower rates over the coming 12 months.
Indian business confidence
India   IHS Markit India Business Outlook
The net balance of companies expecting to register an increase in activity over the coming 12 months is down from October’s +23% to +20% in February, weaker than the average for BRICS (+25%) and the thirdlowest globally.

Manufacturers and service providers both reported lower sentiment, with the respective net balances at +13% and +23%.

Expectations of new product innovations, enhanced marketing efforts, improved underlying demand and stable market conditions are all seen as opportunities for business growth over the next 12 months.

In contrast, a key threat to the 12-month outlook is government policies and decisions.

Other concerns expressed are increasing competition, delayed payments, higher fuel costs and a general increase in raw material prices.

In line with slightly weaker confidence for output, India’s private sector companies expect a slower expansion of new work over the coming year.

Moreover, the net balance fell to a survey-record low and is the lowest among all surveyed countries.

Subdued confidence towards new business gains is evident across both manufacturing and service companies.

Companies plan to increase their staffing levels.

However, hiring intentions are at the lowest level since February 2017 and indicative of modest jobs growth overall.

Moreover, the net balance is the joint-weakest (along with China) globally.

Divergent trends are evident at the sector level as Indian service providers report a brighter outlook, while optimism around jobs growth at manufacturers has waned substantially.

Capital expenditure plans are set to ease over the coming year, with the level of positive sentiment down from the previous survey period.

Investment spending is set to be greater in the service sector than in the goods-producing sector, as confidence related to manufacturing R&D expenditure is the lowest recorded in nearly 9 years of data collection.

Inflationary pressures are expected to rise at a marginally slower rate over the next 12 months, but the respective net balance (+26%) remains above the BRIC average (+25%).

At the sector level, inflationary expectations were weaker at both manufacturers and service providers.


 

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