Having shaken off the impact of two ongoing wars around the world, Indian businesses now appear to be on stronger footing and more optimistic about the future. This is reflected in BT-C's Fore Business Sentiment Survey for October-December 2023, which surveyed 500 chief executive officers (CEOs) and chief financial officers (CFOs). It reached its highest level since the April-June quarter of 2017.
The Business Confidence Index (BCI) rose to 56.5 in the December quarter, slightly higher than 54.1 in the previous quarter. However, prior to this, the BCI reached a high of 57.4 from April to June 2015, and then gradually declined, dropping to a low of 43.2 in the June 2021 period.
Recent data suggests that the domestic economy is showing strength despite the less favorable global situation. The first preliminary estimate of national income predicted that gross domestic product (GDP) would grow at 7.3% this fiscal year, compared to 7.2% in fiscal 2023, defying expectations of a slowdown. Although economic growth appears to have slowed in the second half of the year, high-frequency indicators reveal that demand and consumption remain strong even after the Christmas season.
Aditi Nayar, chief economist and head of research and outreach at rating agency ICRA, said that in addition to high standards, the outlook for agricultural output and rural demand is weak and growth in government capital spending could slow. He said that several factors are contributing to the expected economic slowdown. Economic growth will remain strong in the second half of this fiscal year. “We have revised our growth forecast for the fiscal year to 6.5% and expect a slower slowdown in the second half of the year compared to our previous forecast,” Nayar said.
The latest BCI reveals that business confidence is improving across all sectors. Light industry, comprising food, beverages, textiles, wood, furniture, paper, publishing and leather-related businesses, stands out as the most optimistic company in the December quarter with a reading of 58.6.
Additionally, confidence is rising across all company sizes, with large companies being the most optimistic with a score of 60.2. Meanwhile, small businesses continue to face challenges, with sentiment even more subdued at his 52.3.
Madhavi Arora, Chief Economist at MK Global Financial Services, said business confidence goes beyond just the headline GDP numbers, to the regulatory and policy environment, falling inflation, policy and political certainty, and the state of the economy. He says that it is a function of many factors such as. of business cycles.
“The fourth quarter of the fiscal year is progressing well. Growth may be slower in the second half of the year compared to the first half. Companies may not enjoy as much profit as in the first half. GDP in the second half of 2024 Growth is likely to be around 6.5%, with full fiscal growth expected to be no more than 7% when the final version is released,” she said.
Businesses remain optimistic about the fourth quarter of 2024, suggesting further improvement in overall economic conditions, with the quarter rated at 5.6 out of 10, compared to 5.2 in the previous quarter. I did. Demand conditions, profitability and employment are also seen as improving, although employment sentiment remains relatively subdued, with a rating of 5.5 (see chart). Arora said companies have already hired more than necessary over the past year in anticipation of increased demand and mobility for workers, which could dampen employment sentiment.
This photo isn't all dour. Concerns about rural demand and consumption are troubling to 68% of survey respondents, and 72% believe the upcoming general election will impact government capital spending. “Demand and consumption growth has been uneven, with high demand among some income groups in urban areas, as sentiment has become cautious due to concerns over uneven monsoon rains and rabi crop yields. , rural demand is weak. Commodity prices remain favorable compared to last year's levels, giving manufacturers further confidence,” Nayar pointed out.
India also remains concerned about weak demand, with 71% of respondents saying it is their top concern. For 16%, the main concern was the continued slump in exports. Concerns about price pressure also remain a concern, with food inflation being the top concern for 9% of those surveyed.
The interim budget and Treasury estimates show the economy is on much stronger footing, even though the general election may cause some uncertainty. But it's clear that companies are now confident in dealing with them.
@surabhi_prasad
