Economic recovery soon? Business confidence rebounds in Jul-Sep, says CII; normalcy likely in next fiscal

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September 21, 2020 4:36 PM

With businesses starting to reopen after the government put the entire nation under lockdown due to the coronavirus pandemic, India’s Business Confidence Index has also rebounded in the July-September quarter from the lowest levels this year.

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With businesses starting to reopen after the government put the entire nation under lockdown due to the coronavirus pandemic, India’s Business Confidence Index has also rebounded in the July-September quarter from the lowest levels this year. There is a recovery in CII’s Business Confidence Index for the Jul-Sep quarter “indicating an improvement in business conditions during the period. However, while a recovery is underway, it could be tremendously expedited through continued government support and handholding of businesses during this crisis,” Chandrajit Banerjee, Director General, CII said recently. The latest index has surged to the level of 50.3, bouncing back from its lowest reading of 41.0 recorded in April-June 2020.

The surge has been largely driven by the Expectations Index (EI), which gained 46% quarter-on-quarter, to the level of 55.2, as nation-wide lockdown restrictions were lifted, and businesses gradually began to reopen in Unlock Phase 1. However, the Current Situation Index (CSI), continued to be muted and trailed at 40.6. The weakness in CSI depicts weak confidence during the April-June 2020, the period when India was under one of the harshest lockdowns in the world and business operations were completely at halt.

For the CII survey, 150 companies across all industry sectors, including micro, small, medium and large enterprises, from different regions participated. “The results for the July-September quarter signal green shoots of recovery as nearly half of the respondents anticipate an increase in new orders and sales during the said quarter,” the report said. Capacity utilization levels are also expected to improve in the coming time and a big chunk of the respondents anticipate higher utilization levels in the July-September quarter. However profitability for sometime is expected to be elusive during this pandemic and nearly half of the respondents continue to expect a decline in profits in the July-September quarter. In the coming months, businesses anticipate weak demand as the biggest risk to business confidence in the next six months. Normalcy is expected only by Q1 FY22.

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