New Delhi: For the first time in five years, Indian businesses have lost their domination in the optimism league table. India now shares the top spot on the optimism league table with Philippines, where a similar proportion of the respondents are as optimistic as in India, on the outlook of their country’s economy over the ensuing twelve months.
According to the Grant Thornton International Business Report (IBR), businesses are resilient in the face of global financial turmoil. The annual survey of privately held businesses shows that despite intense media coverage on the global financial crisis, 42% of businesses across the globe are still feeling optimistic about the economic outlook for the next 12 months. This figure is just three percentage points lower than the figure in January 2007.
Although, the optimism levels in India are well above the global average of +42% and the East Asian average of +40%, Indian businesses are marginally less positive than they were last year.
India’s optimism relating to exports in 2008 has increased significantly by 16%, in contrast to the rise in global exports optimism going up marginally by 2%.
Indian businesses are also relatively more upbeat about investments, with 61% of the respondents feeling that they would make investment in new buildings over the ensuing year.
However, Monish Chatrath, National Markets Leader at Grant Thornton India says: “The positive survey result reflects the overall confidence that the global economy will remain buoyant. However, it is the robust pace that was seen over the past five years, which appears to have ended and we have entered a period of greater uncertainty. Indian businesses are buoyed by the ongoing success of their economy and their increasing integration into world markets.”
In developing Asia, economic activity in 2008 is expected to proceed at vigorous pace, largely unaffected by the financial market turmoil of 2007. Another year of double-digit growth is in prospect for China, while India is expected to grow at over 8%.
There are, however, some key threats facing businesses and the global economy over the coming 12 months. These include the end of fixed rate mortgage deals for millions of homeowners. The financial implications are not only a marked slowdown in the global housing market, but also a reduction in consumer spending. There is also a fear that the seizure in credit may filter down to consumer credit and mortgage repayments causing significant increases in loan defaulting and home repossessions.