Business optimism in India remains tepid in Q2: Thornton

Business optimism in India remained tepid in the second quarter of this year and the country continues to rank 6th in the global optimism index, says a survey. A similar trend was seen globally as business optimism dropped from the record high "net" 61 per cent in Q1 2018 to a "net" 54 per cent in Q2 this year, according to Grant Thornton's International Business Report (IBR), a quarterly global business survey.

India has recently been declared as the 6th largest economy by the World Bank, surpassing France. However, higher twin deficits resulting in a falling rupee and rising crude oil prices and inflation continue to be the reasons for the sluggish business optimism in the country, the survey released today said.

"It (India) continues to rank 6th on the optimism index with 75 per cent businesses in India optimistic about the economic outlook in Q2 2018," the Grant Thornton's report said. Indonesia topped the optimism index, followed by Netherlands, Austria, Philippines and Mainland China.  The advisory firm said that the confidence of Indian businesses has been low since Q3 2017 and is indeed a wake-up call for the government and policymakers.

"Rising oil prices and inflation and therefore expected interest rate revisions, in the middle of an election year, threaten the much talked about reversal in the investment cycle in India," said Vishesh C Chandiok, CEO, Grant Thornton India. "Further, mid-sized businesses continue to complain of capital shortage due to our banking system still being over cautious because of mistakes of the past.

"The fundamentals behind high gross domestic product (GDP) growth remain intact though the mood on the street isn't going to change to overall optimism any time before the next government is well in place,? said Chandiok. The report is based on the results of a quarterly global business survey of 2,500 businesses in 32 economies. Globally, businesses are optimistic about an increase in revenue, with 70 per cent of Indian businesses surveyed also expressing the same sentiment.

With expectations of increased revenue, corporate India also showed increased positivity to invest in research and development activities, the survey said, adding the optimism for profitability also improved compared to the last quarter. According to the survey, India Inc also expects a rise in exports in the coming year.

However, this buoyant sentiment is not reflected in selling price and employment expectations. Due to rise in inflation and GST, only 45 per cent Indian businesses are expecting a rise in selling prices, the survey said. Although, revenue expectations have increased and availability of skilled workforce remains a key constraint for growth, employment expectations are low, it added.

For the past four quarters, India had been topping the charts in considering red tape and information, communications technology (ICT) infrastructure as the main concern for growth.