Covid fallout: Business optimism for Jul-Sep quarter slips to record low

States like West Bengal and Odisha have been severely impacted by the super cyclone ‘Amphan’, and floods have affected millions in Assam.

Business optimism for the July-September quarter slumped to a record low due to sharp rise in COVID-19 cases, the extension of lockdown in containment zones and staggered easing of restrictions, according to a report. Dun & Bradstreet Composite Business Optimism Index for the July-September quarter fell to a record low of 29.4. The index registered a decline of 40.6 per cent over the last quarter. The BOI covered about 350 senior executives in June this year.

“The spike in the number of positive COVID-19 cases, the extension of lockdown in containment zones and the staggered easing of restrictions affected the business optimism levels,” said Arun Singh, Global Chief Economist, Dun & Bradstreet. All six optimism indices — volume of sales, net profits, selling prices, new orders, inventories and employees — have registered a decline as compared to the previous quarter, the report said.

“The plethora of containment and non-containment zones, which are near-impossible to track in real time, and the rapid change in guidelines adopted by the various local governments have led to considerable uncertainty amongst businesses that are planning to resume their operations,” Singh said.

While various measures have been taken to support the flow of capital to businesses, bank credit to industries continued to remain subdued, Singh said, adding that “muted credit disbursements might have also affected the optimism levels”.

Besides, states like West Bengal and Odisha have been severely impacted by the super cyclone ‘Amphan’, and floods have affected millions in Assam. Moreover, the India-China border conflicts have also added to the uncertainty in the business environment, he said. “The steep fall in the business sentiment indicates the concern amongst businesses about the delay in the full-fledged recovery of the economy,” Singh noted.

Meanwhile, the Reserve Bank of India on Thursday said that the protracted spread of the COVID-19 pandemic poses “downside risk” to the domestic economy, which is expected to remain in the negative zone this fiscal.

“… real GDP growth in the first half of the year is estimated to remain in the contraction zone. For the year 2020-21 as a whole, real GDP growth is also estimated to be negative,” RBI Governor Shaktikanta Das said.