RBI Survey: Business sentiment nosedives as Covid-19 crisis deepens; here’s what survey reveals

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Published: April 5, 2020 1:54:30 PM

860 companies responding in the RBI's Industrial Outlook survey assessed “some improvement” in production and order books along with “mildly optimistic” employment scenario from the preceding quarter.

The respondents had expected improvements in demand conditions in Q1 FY21. (Representative image)

The Coronavirus pandemic’s adverse impact on industrial activities deteriorated business sentiments during Q4 FY20 while for the current quarter there is “stark pessimism” among businesses across all sectors, according to a quick survey by the Reserve Bank of India (RBI) conducted during March 18-20, 2020. The survey followed the results of 89th round of the Industrial Outlook Survey of the manufacturing sector for Q4 FY20 by RBI that interestingly had shown a different picture of sentiments before the Covid-19 crisis gained momentum in the country.

860 companies responding in the survey assessed “some improvement” in production and order books along with “mildly optimistic” employment scenario from the preceding quarter. Moreover, sentiments on external demand and overall financial situation stood positive for Q4FY20. The respondents had also expected improvements in demand conditions in Q1 FY21 while optimism continued on the overall financial system. Majority parameters including production, exports, imports, employment, overall financial situation and overall business situation, the expectations in terms of net responses for the current quarter had improved from 17.2 per cent to 23.7 per cent, 8.6 per cent to 11 per cent, 5.4 per cent to 6.6 per cent, 1.8 per cent to 5.2 per cent, 19.5 per cent to 24.3 per cent and 22.6 per cent to 28.2 per cent respectively.

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However, according to the second survey in which 48 companies responded again, the expectations plummeted for Q1 FY21. Across five parameters of production, order books, employment, capacity utilisation, and overall business climate, the sentiment declined to -37.5 per cent from 13 per cent (before Covid-19 impact assessment), -41.9 per cent from 16.3 per cent, -14.6 per cent from 4.3 per cent, -40.4 per cent from 22.2 per cent, and -35.4 per cent from 26.1 per cent respectively.

The Coronavirus impact hurting India’s growth story was also reflected in the projections of global rating agencies. According to Fitch Ratings, India’s GDP may grow only 2 per cent in FY21 – slowest since the economy was liberalised 30 years back, while Asian Development Bank expected 4 per cent fall in the economic growth, PTI reported. S&P Global Ratings had also cut India’s GDP forecast from 5.2 per cent to 3.5 per cent.

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