Business optimism back after note-ban shock

The dampening effects of demonetisation that purged 86% of the currency in the economy, seem to have had only a temporary effect as expected by the central bank


The overall business sentiment index improved marginally, and the Business Expectations Index rose to 106 in the March quarter from 101.1 in the December quarter. Graphic by Naveen Kumar Saini/Mint
The overall business sentiment index improved marginally, and the Business Expectations Index rose to 106 in the March quarter from 101.1 in the December quarter. Graphic by Naveen Kumar Saini/Mint

Indian businessmen are more confident now than before of maintaining their profit margin and expect pricing power to improve, according to the latest industrial outlook survey of the Reserve Bank of India (RBI).

The survey shows that perceptions on profit margin, order books, capacity utilization and financing conditions showed an improvement among manufacturing companies for the fourth quarter of 2016-17.

The dampening effects of demonetisation that purged 86% of the currency in the economy, seem to have had only a temporary effect as expected by the central bank.

The overall business sentiment index improved marginally, and the Business Expectations Index rose to 106 in the March quarter from 101.1 in the December quarter.

Indian consumers more pessimistic than before

The Reserve Bank of India’s (RBI’s) Consumer Confidence Survey shows that the average Indian is more pessimistic than before about jobs, economic conditions, incomes and inflation.

The Current Situation Index entered into the pessimistic zone, sliding below 100 for the first time since September 2014.

The index fell to 98.7 in March due to worsening sentiment on economic conditions and the price situation.

The Future Expectations Index also declined sharply to 121.7 in March from 129.7 in December 2016, with the outlook worsening on all parameters, barring spending.

Congestion-related volume loss falls to a low

Volume loss due to grid congestion in the spot electricity market fell to record lows on the Indian Energy Exchange in 2016-17.

Thanks to augmentation and improvement in the interstate transmission network, volume loss due to grid congestion dropped almost one-third to 1.5 billion units in the just concluded fiscal year.

The improvement in transmission capacity helped discover uniform tariffs across the regions for 22 days in 2016-17. Uniform tariff discovery across regions was seen for only six days in 2015-16.

While the trends point to an improving transmission network, the “one nation, one grid, one price” ambition is still some distance away, as progress on the augmentation of state transmission networks is slow.

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