News Flash

Indian business sentiment recovers in Jul-Sep: CII survey

21 Sep '20

3 min read

Pic: Shutterstock

Business sentiment in India has bounced back, according to the recent CII Business Outlook Survey, which found green shoots of recovery the Jul-Sep quarter as nearly half of the respondents anticipated a rise in new orders (49 per cent) and sales (46 per cent) during that quarter, even though a majority of them witnessed decline in sales and new orders in the preceding quarter.

The latest CII business confidence index surged to 50.3 in the quarter, bouncing back from its lowest reading of 41.0 in the Apr-Jun quarter. The recovery in the index has been supported by the remarkable increase in the expectations index (EI), which rose by 46 per cent quarter on quarter to 55.2, as nation-wide lockdown restrictions were lifted and businesses gradually began to reopen during the current quarter, CII said in a press release.

The current situation index (CSI), however, continued to trail below 50, at 40.6, depicting weak confidence during the Apr-Jun quarter—a period marked with stringent lockdown measures and complete shutdown of business operations.

The survey was conducted between August and September, covering more than 150 firms across all sectors.

A major share of the respondents (41 per cent) foresee higher utilisation levels of 50-75 per cent in the Jul-Sep quarter, closely followed by 37 per cent of them anticipating capacity utilisation at 75-100 per cent in that quarter.

“It is heartening to note the 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,” CII director general Chandrajit Banerjee said.

Profitability, however, may be slightly harder to achieve during this pandemic as nearly half of the respondents continue to expect a decline in profits in the Jul-Sep quarter after a majority of them (76 per cent) experienced this in the preceding quarter.

As businesses still struggle to recover from the pandemic, more than half of the respondents (51 per cent) indicated that the weakness in domestic demand is likely to be the topmost risk to business confidence in the next six months.

Further, nearly 30 per cent of them feel business activity may return to the pre-pandemic levels by the first quarter of the nest fiscal. The heightened uncertainty led by the recurrent lockdown in certain states is affecting business operations and lengthening the recovery timeline even though a majority of the workforce has already returned to the place of work for a major share of the respondents (42 per cent).

Effectively, a large share of respondents (37 per cent) foresees a return of capital spending to its pre-pandemic levels only by the first half of the next fiscal.

With regards to the general economic prospects, more than third of the respondents (35 per cent) foresee a contraction higher than 4.0 per cent in India’s gross domestic product (GDP) in this fiscal as the significant setback to economic growth has been further aggravated by state-imposed lockdowns to curb local outbreaks.

On the inflation front, nearly half of the respondents (46 per cent) feel that it may inch up further in the current fiscal as the supply-side disruptions caused by the lockdown-led business shutdowns have stoked price pressures. As a result, 37 per cent of the respondents feel that the Reserve Bank of India may keep policy rates unchanged in the remaining part of this fiscal.

Fibre2Fashion News Desk (DS)

More Confederation of Indian Industry (CII ) News... More Textiles News - India...