Ahead of the Budget, a survey has revealed that India Inc’s business confidence slipped to a four quarter low as demonetisation pulled down performance and clouded its assessment of the economy. According to Ficci’s latest Business Confidence Survey, the Overall Business Confidence Index (OBCI) slipped to a four quarter low of 58.2 vis-a-vis 67.3 in the last round as 4 out of 5 companies reported weak demand. “The fall in overall index value was largely on account of the weakness that has gripped the performance of corporate India on account of demonetisation and their assessment of the current state of economy,” the survey said.
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A decline was noted in the proportion of respondents foreseeing higher sales. About 46 per cent respondents said that they expect sales to increase over the next six months as compared to 62 per cent in the previous round. The survey was conducted between December 2016 and January 2017 to capture the assessment of the current situation as well as gauge expectations regarding performance for the next six months. It drew responses from about 207 companies belonging to a wide array of sectors.
Notably, the outlook of respondents on employment generation worsened with only 18 per cent of the surveyed firms anticipating an increase in hiring in the coming six months as against 31 per cent in the previous round. Further, 66 per cent do not foresee any fresh hiring in the near term. Significantly, weak demand once again emerged as a key impediment to business performance of companies.
While some respondents indicated a time frame of three months for things to normalise, others felt it could even take about a year. Nonetheless, a majority of them said that things should be back to normal in next six months (by June 2017). Majority of respondents said demonetisation is a positive step towards reducing black money and corruption, while admitting that the move did have an impact on their sales.
Firms belonging to sectors such as automobile and ancillary industries, farm based products, construction, mining and cement reported a direct hit on their performance. Respondents opined that GST implementation, uptick in US economy, lower interest rate and new infrastructure projects kicking off will aid growth going ahead.
Sharing their Budget wish-list, the companies said they expect the government to stimulate demand for consumer goods, lay a thrust on infrastructure and further ease of doing business through measures like reduction in compliances with the Labour Department.
The firms want removal of remaining inverted duty structure that does not favour local manufacturing, reduction in corporate tax and income tax rates and roll out of the GST. The respondents seemed upbeat about the export prospects, with 54 per cent foreseeing higher exports over the next two quarters as against 32 per cent in the previous round.
Besides, 44 per cent of the participants anticipate higher investments over the next six months, 3 percentage points higher than in the previous round. The private domestic capex cycle has been weak and a break away from this trend will be critical to support and sustain growth, according to the survey. However, they foresee a pickup in demand (both domestic and external) over the period January to June 2017.