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Indian companies more optimistic towards future output growth

Staff Writer | November 15, 2017
The latest IHS Markit Business Outlook survey signals an improvement in business sentiment among both manufacturing firms and service providers in India.
Indian companies
The net balance of companies projecting activity growth over the coming year stands at +23%, up from +18% in June and the strongest since October 2016 (+25%).

However, the level of business confidence remains below the global average (+32%) and is the thirdlowest globally.

Confidence among India’s service providers surrounding output has strengthened further in October, climbing to the highest level since early-2015.

Manufacturers remain comparatively less confident about their prospects, despite sentiment reaching a one-year high.

India’s private sector firms indicate that a number of factors are likely to bolster business activity over the coming year, including expectations of better demand conditions, and the positive effects of the goods & services tax.

On the other hand, some survey respondents consider the GST as a threat to the outlook.

Activity growth is set to be supported by a rise in new business levels.

The net balance of firms anticipating an increase in new work is the highest since October 2016 as optimism improves at goods producers and service providers alike.

India business activity expectations Employment & Investment plans Companies plan to increase their payroll numbers over the coming year, in line with forecasts of new business growth.

Manufacturers’ hiring intentions strengthened in October to the strongest since October 2014.

Service providers also anticipate job creation, with optimism the highest in a year.

That said, confidence levels across both sectors are much lower than seen for other monitored countries.

Inflation Expectations On the price front, companies expect cost inflationary pressures to intensify further over the next 12 months, with the net balance of firms predicting greater cost burdens the highest in one year.

In response to predictions of higher average cost burdens, Indian companies intend to raise their selling prices over the next 12 months.

That said, the net balance of enterprises planning to raise charges is unchanged from that noted in June.

According to anecdotal evidence, intensified competition and fears of a fall in demand is likely to restrict firms’ ability to fully pass on higher cost burdens to clients.