Mumbai: IHS Markit's India business outlook survey shows business sentiment of Indian manufacturers and services providers fell to a multi-year low in June.
Falling from +18% in February to +15% in June, the net balance of private sector companies foreseeing output growth in the year ahead matches the equally poor reading in June 2016. Note that this is the lowest reading since data became available in October 2009.
Anecdotal evidence suggests that water shortages, public policies and weak sales have restricted sentiment in June, said the survey.
The net balance figure is calculated by deducting the percentage number of respondents expecting a deterioration/decrease in a variable over the next twelve months from those expecting an improvement/increase.
Companies also expressed their concerns about potential rupee depreciation pushing prices for imported materials higher, a lack of skilled labour, likely tax hikes, financial difficulties and customers increasingly demanding discounts.
However, Pollyanna De Lima, Principal Economist at IHS Markit said that hopes of pro-business government policies and a better financial flow continue to underpin optimism towards output and profitability growth in the year ahead.
While there is no harm in hoping that things will turn around for the Indian economy, in the current scenario where there is a liquidity crunch and a consumption slowdown, a recovery will be easier said than done.
This survey conducted for worldwide manufacturing and services is based on a survey of around 12,000 manufacturers and service providers that are asked to give their thoughts on future business conditions. While the figure equals the average for emerging markets, it is below that seen globally.
The reports for this survey are produced on a triannual basis, with data collected in February, June and October. The latest survey was conducted between June 12 and 26.