In a New Low Since 2014, India Ranked 6th on Business Optimism Index
Surge in oil prices and weakening of currency has led to the deterioration of business optimism in India, according to Grant Thornton’s International Business Report.
India has been ranked sixth globally on the business optimism index in the first quarter of 2018, a significant drop as the country had been topping the chart since 2014, according to Grant Thornton’s International Business Report (IBR) released on May 8. The quarterly business survey has said that with the weakening currency and a surge in oil prices, business optimism in India has been shaken since the third quarter of 2017. India was ranked seventh in the last quarter of 2017.
While India slipped in revenue expectations from top position in the second quarter of 2017 to 14th spot in the fourth quarter, its ranking on expectation for higher selling prices dropped from sixth place in first quarter of 2017 to seventh in the first quarter of the current financial year.
India was ranked sixth in employment expectation in the first quarter, while the country’s profitability was ranked 13th.
Red tape, regulations, availability of skilled workforce, lack of ICT infrastructure, and shortage of finance are the biggest growth constraints cited by Indian businesses, according to the report, compiled after a survey of 2,500 businesses in 37 economies. “Even after India’s significant jump in World Bank’s Ease of Doing Business ranking, the country still continues to rank 1st or 2nd in quoting these reasons as the key hurdles for growth,” it said.
While Indian businesses have shown interest in investing in new buildings in recent years, they haven’t given much thrust to investment in plant and machinery, the report added.
The underlying pessimism is reflected in other parameters as well, such as revenue, selling prices, profitability, employment and exports expectations. “The reversal in sentiment amongst mid-sized business in India in the last 3 quarters is startling and I hope policy makers will sit up and take note,” Vishesh C Chandiok, CEO, Grant Thornton India LLP, said in a statement. “With oil climbing, and India firmly in an election year, we ought to brace for a volatile economic environment in the days ahead. Export oriented businesses should see better days, finally.”
Business optimism, however, is at all-time high globally, the organization said, adding, “The IBR finds that in first quarter of 2018, global business optimism stands at net 61 per cent – the highest figure recorded in 15 years of research.”
Welcoming the “healthy and widespread levels of optimism” in businesses globally, Francesca Lagerberg, Global Leader Network Development at Grant Thornton, said: “We haven’t seen such high optimism levels for some time, not least in Spain, Italy and Greece. Why is business optimism so high? A likely factor is that globally, the economic fundamentals are strong. The strongest they have been since the financial crisis. GDP growth in most regions is growing. We are seeing a broad-based and inclusive spell of economic growth across markets.”