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Business confidence in India rises: KPMG

The confidence of service sector in BRIC countries has witnessed a sharp rise,KPMG says.

Written by Agencies | New Delhi |
May 14, 2009 1:35:37 pm

The confidence of service sector firms in the BRIC countries,including India,has witnessed a sharp rise in April on expectations of faster growth in business activity,revenues and recruitment in the next 12 months,a KPMG survey says.

The 2009 BRIC Services Business Outlook survey by global consultancy KPMG signals an improvement in confidence in April after a sharp drop seen in October,2008,amid the economic crisis.

“Optimism is highest in Brazil,while confidence has also rebounded strongly in Russia and India. However,sentiment in China has eased a little compared with the previous survey,although it remains highly positive,” the KPMG survey said.

The BRIC Business Outlook Survey shows that India’s service sector is set to grow solidly in proceeding 12 months. A net balance of 31.1 firms foresee their activity levels expanding,up from 15.3 last autumn to 60.3,it stated.

“Improved sentiment is encouraging and reflects fact that many sectors have a significant dependency on domestic market and have been positively impacted by lower interest rates,lower inflation and improved liquidity. Outcome of national elections and monsoons will in the next few months determine how this trend develops,” KPMG India CEO Russell Parera said.

With business activity expected to rise in the next 12 months,BRIC service providers will also step up their recruitment,the survey revealed.

Confidence on staffing levels is up in all nations,with Brazilian firms particularly confident of a rise.

Further,revenues and profits at Indian service firms are set to expand in 12 months’ time,according to the findings.

The respective net balances of 31.1 and 32.5 are up markedly on their levels of six months ago,reflecting improved forecasts for activity,new business and charges.

In India,staffing numbers are forecast to grow during the coming year,in line with expectations for higher activity. Net balance for employment rose from 10.4 to 18.9 and firms also expect a rise in amount of work they outsource.

“Findings perhaps suggest that BRIC nations can achieve reasonable growth rates this year,even as developed economies are set to contract. Clearly,the extent to which the big emerging markets can take up the slack from the US,Europe and Japan will be a key determinant of global economic prospects,” KPMG’s High Growth Markets Practice Chairman Ian Gomes said.

The report pointed out underlying forecasts for activity growth has improved confidence about volumes of incoming new business and about 37 per cent firms forecast new order growth in one year’s time,while 16 per cent anticipate a fall.

Similarly,capital expenditure at Indian service firms is anticipated to rise solidly in year ahead with 43 per cent reporting they were looking to hike spending on fixed assets.

Interestingly,service sector firms in BRIC countries are set to outsource a greater value of their business activities during the coming 12 months. Hotels and transport companies anticipate the strongest rises in outsourcing.

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