Business Today's Business Confidence Survey shows significant weakening of sentiment

Businesses in India believe the business environment has worsened since July, primarily owing to a weakening of the global and the domestic economies, according to the Business Today's Business Confidence Survey. Respondents to the survey say they have had to cut back on production and slow down investments as profit margins get thinner and they find it difficult to pass on cost increases to consumers.

For the first time since the quarterly survey series began in March, the survey shows companies plan to go slow on hiring.

Nearly half of the 500 Chief Executive Officers and Chief Financial Officers surveyed agreed they had put off or dropped expansion projects and cut capital spending. Fifty nine per cent of the respondents surveyed by market research agency C fore for Business Today, India's top magazine by readership, in the last week of September said they believe GDP growth cannot cross the eight per cent mark in the next two to three years.

Business Today launched its Business Confidence Index survey in March. The first round had showed that companies were enjoying pricing power, which the Reserve Bank of India had later said it would like to reduce through its policies as it was fuelling inflation. In the latest survey, 55 per cent of the respondents say they expect their selling prices to be substantially or moderately worse in the quarter October to December. This shows companies have lost pricing power.

"The survey clearly reflects the pessimism prevailing among businesses in the economy. Unless confidence is restored in the business fraternity --- and all of us know that the European and US economies are not in great shape --- India is looking at a marked slowdown in its economy in the coming quarters," said Aroon Purie, Editor in Chief, India Today group of publications, which Business Today is part of.

Commenting on the Business Today Business Confidence Index, Shankar Raman, Group CFO, L&T, said urgent policy measures were needed. "It is clear that the motivation to take a decision and move on to execution is not there. With better handling policy makers can still prevent a cyclical downturn or in another two quarters, the economy will settle down into a new, lower norm”we will maybe become a six-per-cent economy."

The Business Confidence Index survey is covered in detail in the latest issue of Business Today (cover: The Rainmaker, October 30).