Business optimism is down, says Grant Thornton

NEW DELHI: Indian companies are not expecting big-bang sales next year, with the country slipping five places in Grant Thornton’s quarterly business confidence survey. According to firm’s International Business Report, released on Wednesday, India has slipped in the ‘business optimism’ index to the seventh position for the second quarter of the financial year, from the second place during the previous three months.

The index is currently topped by Indonesia, followed by Finland, the Netherlands, the Philippines, Austria and Nigeria. One of the major reasons why Indian business confidence is not as exuberant as earlier is because companies do not expect high confidence in revenue growth for the next 12 months, with the report stating that Indian firms expressed “low confidence” in this aspect.

Confidence in profitability has also fallen sharply, with only 54 per cent showing optimism compared to 69 per cent last quarter. Other parameters like expectations of increase in selling prices and exports have also suffered a slight fall in optimism in this quarter, the report said.

Grant Thornton India LLP’s Harish H V said there were clear signs of lag in the economy which caused the drop in ratings. “However, the overnment actions and reforms coupled with the significant jump in Ease of Doing Business Rankings should bring back optimism in Indian Business in the next few quarters,” he added.

One of the areas where Indian businesses are optimistic is the increase in employment, with 54 per cent of respondents seeing a need to increase hiring over the next year, up three per cent from the previous quarter. Firms are also confident about R&D and plant focused investments.

However, despite prodigious improvement in ease of doing business rankings, Indian firms topped the chart in citing regulations, red tape and lack of ICT infrastructure as the biggest growth constraints. Shortage of finance and lack of skilled manpower were other factors pulling down confidence.
Globally, business optimism remains relatively high at 49 per cent. But, many emerging markets have recorded falling confidence.

“Profits are under pressure. Wage bills are firmly on the rise as businesses try to tackle the skilled worker shortage. It is an issue that is becoming acute,” said Grant Thornton Global Leader Francesca Lagerberg, adding that “9 in 10 of the world’s largest economies have reduced their profit outlook for the coming year”.