Private sector business sentiment has fallen to its lowest level since October 2009 as firms expect a subdued order flow in the next 12 months and job creation is likely to be moderate, says a Markit survey.
According to the Markit India Business Outlook survey, the June net balance – the proportion of people expecting an increase deducted by the proportion of people who see a decrease – stood at (+) 22 per cent, the lowest since the composite data were first available in October 2009.
Moreover, the net balance in India is also below global average.
The net balance varies between (-) 100 and (+) 100, with a value of 0.0 signaling a neutral outlook for the coming 12 months.
“Indian companies have maintained a positive outlook in June… Nonetheless, in all cases, the levels of positivity have weakened since the February outlook as forecasts of competitive pressures and higher cost burdens have weighed on confidence,” Markit Economist Pollyanna De Lima said.
The factors seen as “threats” to business outlook include competitive pressures, raw material shortages, increased tax rates and strong inflation, the survey said.
In line with expectations of weaker increases in new business inflows, revenues are expected to expand at a softer rate and the degree of optimism towards profitability growth has also weakened, Markit added.
Although Indian companies foresee further job creation in the coming 12 months, confidence level has dipped below the worldwide trend.
“Hiring is still foreseen, but the rate at which companies are willing to take on additional workers has moderated,” Lima said adding that “this is the case in both the manufacturing and service sectors”.
On the price front, panelists maintained that costs and charges will rise in the year ahead.
“In both the cases, the rates of inflation are anticipated to be higher than their respective global averages,” Lima added.
In its last policy review on June 2, RBI had cut the repo rate by 0.25 per cent for the third time this year to spur investment and growth, but hinted that there may not be any more cuts in the near term.