Expectations on Economy Turn Negative, Business Today's Business Confidence Survey Shows

NEW DELHI, July 17, 2013 /PRNewswire/ --

• Tenth round of survey shows the lowest level of confidence since the survey began in March 2011
• Nearly half the 500 Indian CEOs/CFOs surveyed report that overall economic conditions have worsened in the April-June quarter over the previous quarter
• Three in four respondents expect economic situation to worsen in the July-September quarter

The turmoil in the foreign exchange market undid the gains of the last three quarters and the confidence level of businesses has dipped for the first time in four quarters. Some 75 per cent in the latest Business Today-C fore Business Confidence Survey say the economic situation will worsen in the July-September quarter.

Two-thirds of the respondents said the current state of governance has made them look overseas for investment opportunities. The dramatic dip in sentiment has come on the heels of a large number of respondents turning upbeat about economic prospects after the last Union Budget. Forty-five per cent of the respondents were hopeful that the budget would have a positive impact on their company's performance.

Earlier, the government had announced a series of economic reforms such as partial deregulation of diesel prices, permitting foreign investment into organised retail, setting up of the Cabinet Committee on Investments, amendments to the land acquisition bill, and clearing the Banking Laws (Amendment) Bill, 2011, among others.

The combined impact of these measures and the Union Budget had resulted in an increase in confidence level for three consecutive quarters.

On a scale of 100, confidence levels fell to 48.7 for April-June quarter, the lowest ever score recorded in the ten consecutive quarters that the survey has been conducted.

                      Apr-   Jan-   Oct-   Jul-   Apr-   Jan-   Oct-   Jul-    Apr-   Jan-
                      June    Mar    Dec   Sept    Jun    Mar    Dec    Sep     Jun    Mar
                      2013   2013   2012   2012   2012   2012   2011   2011    2011   2011
    Overall Business
    confidence index  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       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          48.2   54.2   52.3   51.9   48.7   53.2   51.8    56.3   64.1   74.5
    Business
    confidence index
    for Services      50.8   57.7   56.8   55.5   52.4   59.5   55.2    58.6   65.7   75.7

Business Today-C fore Business Confidence Survey, which has captured the mood of corporate India for ten quarters now, has become a bellwether of business and economic sentiment since its inception in January-March 2011. The first survey recorded the highest-ever confidence level at 74.8.

In the latest round of the survey, 93 per cent respondents said they believed their profits will remain the same or worsen in the July-September quarter, and 62 per cent expect hiring to remain unchanged or worsen. "If the government were to create a systematic plan to dent confidence, it couldn't have done a better job," said Rahul Bhasin, Managing Director, Baring Private Equity Partners (India).

Industry is constantly watching the rupee, which has lost some 10 per cent against the US dollar since April, as it has begun to have a significant impact on decision making. "Many companies and investors are either holding back or postponing their investments, waiting for the rupee to reach the right level against the US dollar," said Shekar Viswanathan, Vice Chairman and Whole-Time Director, Toyota Kirloskar Motor.

Aroon Purie, Editor-in-Chief, India Today Group, of which Business Today is a part, said the survey results indicates the economy may not yet have bottomed out. "The survey results reflect the vulnerability of the economy to external shocks. Much more needs to be done on the twin fronts of economic reforms and government decision making to move the needle on business confidence decisively."

Contact:

Rohit Dhingra
Sr. Manager – Business Development
+91(0)120-4807100