Business Confidence Survey August 2015

Transcription

1 Overall Business Confidence Index slips seven notches to 66.3 in the latest survey Latest round of FICCI s reported signs of moderation in the optimism level of corporate India. The index value slipped to 66.3 according to the results of FICCI s latest survey, which is a six quarter low. The build-up in confidence noted since Government assumed office last year has been encouraging, however the same momentum needs to be sustained going ahead. According to results of the latest survey, the participating companies did not report much improvement in the current conditions vis-a-vis last six months at the economy and firm level. At the economy level the proportion of respondents citing moderately to substantially better performance vis-a-vis last six months declined to 66% in the present round from 73% stating likewise in the previous round. This perception of respondents finds ground in the actual economic data as well; a firm rebound in the economy still remains elusive. Nonetheless, an increase was noted in proportion of respondents indicating improved conditions compared to last six months at the industry level. Further, the near term expectations of respondents also noted some restraint. In the current round even though a majority of respondents said that they anticipate a moderately to substantially better performance over the next two quarters, the proportion of companies that hold this view has moderated when compared to the previous survey round. In the latest survey about 78% of the respondents said that they foresee an improved performance at the economy level in the coming six months; the corresponding figure in last survey was 94%. At the industry level, 71% of the respondents cited a better performance in the coming six months in the present round, vis-à-vis 87% stating the same last time. The corporate results for the first quarter of this fiscal year indicated weak performance owing to a host of domestic and global factors. The capacity utilization rate of companies remains low with about % of the participants reporting that they are operating at below 75% capacity. In addition, results with regard to operational parameters indicate mixed signs. Even though the proportion of respondents anticipating an increase in investments, profits and employment noted an increase in the latest survey; this was offset by an increase noted in the proportion of participants foreseeing worsening for these parameters. Further, the outlook of the respondents with regard to sales and exports also took a beating. In the current survey, 43% of the respondents said that they expect higher investments over the next six months, vis-à-vis 38% stating likewise in the previous round. However, the proportion of respondents anticipating lower investments went up to 9% in the present survey from 3% last time. Likewise with regard to profits, while the proportion of respondents foreseeing higher profits increased to 37% in the current survey from 32% last time; those anticipating a decline increased to 17% from 3% in the last survey. As for the sales prospects, 66% of the respondents in the current round expected higher sales over the near term, vis-à-vis 73% stating likewise in the last round. With the global recovery remaining fragile, export prospects remain muted. In the current survey, 48% respondents anticipated higher exports, 11% points lower than those stating likewise in the last round. Weak demand situation has been cited to be a concern by almost 71% of the companies in the present survey and this has been a persistent concern for almost a year. Page 1

2 Despite the Reserve Bank of India undertaking three rounds of cut in the repo rate in this calendar year, cost of credit was reported to be a bothering factor by 58% of the respondents. In the previous round 55% companies had stated likewise. It may be noted that the Banks have cut the lending rates by about 25- bps and we are yet to see a full transmission of the cuts in repo rate. In addition, an increase was noted in the proportion of respondents citing threat of imports to be a constraint. According to the survey results, 44% of the participants indicated rising imports to be a worry for them, vis-à-vis % stating likewise in the last survey. The corresponding figure a year was 28%. Those indicating imports to be a concern belonged to sectors like steel and steel products, agricultural machinery, textile machinery, food processing, electronic products, paper products, plastic products and chemicals. Profile Page 2

3 Q1 (5-6) Q3 (5-6) Q1 (6-7) Q3 (6-7) Q1 (7-8) Q3 (7-8) Q1 (8-9) Q3 (8-9) Q1 (9-) Q3 (9-) Q1 (-11) Q3 (-11) Q1 (11-12) Q3 (11-12)* Q1 (12-13) Q3 (12-13) Q1 (13-14) Q3 (13-14) Q1 (14-15) Q3 (14-15) Q1 (15-16) Q1 (5-6) Q3 (5-6) Q1 (6-7) Q3 (6-7) Q1 (7-8) Q3 (7-8) Q1 (8-9) Q3 (8-9) Q1 (9-) Q3 (9-) Q1 (-11) Q3 (-11) Q1 (11-12) Q3 (11-12)* Q1 (12-13) Q3 (12-13) Q1 (13-14) Q3 (13-14) Q1 (14-15) Q3 (14-15) Q1 (15-16) The survey drew responses from about 1 companies with a turnover ranging from Rs 6 crore to Rs 92, crore and belonging to a wide array of sectors. The survey gauges expectations of the respondents over the period July to December 15. Steel Food Processing Plastic products Oil and Gas Agricultural Machinery Real Estate & Construction Trading and Investments Broad Sectoral Coverage Paper& paper products Electric Machinery/Products Infrastructure Textiles Hospitality Cement Chemical Detailed Findings FICCI s Overall Business Confidence Index slips to a six quarter low Conditions and Expectation Index Condition Index Expectation Index Overall Business Confidence Index conditions index Expectations index Overall business confidence index Overall Business Confidence Index value moved down almost seven notches according to results of FICCI s latest survey. The index value stood at 66.3 in the present round, visà-vis 73.2 in the previous round. The decline can be attributed to the slack noted in the perception of the respondents both with respect to current conditions (vis-à-vis last six months) and near term expectations. Condition vis-à-vis last six months (Proportion of respondents) Page 3

4 Substantially Better Substantially Worse Economy Industry Firm Results of FICCI s latest survey report moderation in the proportion of respondents citing an improvement in performance vis-à-vis last six months at the economy and firm level. 63% of the companies participating in the survey reported moderately to substantially better performance vis-à-vis last six months at the economy level. In the last survey round the corresponding number was 77%. However, an increase was noted in proportion of respondents indicating improved conditions compared to last six months at the industry level. Further, in the current survey the proportion of participating companies reporting a moderately to substantially worse performance vis-à-vis last six months noted an increase at all the three levels- economy, industry and firm. The increase was most perceptible at the level of industry, with the number of respondents anticipating worsening going up from 3% in last survey to 23% in the latest survey. Expected performance over next six months (Proportion of respondents) Economy Industry Firm Further, according to results of FICCI s latest the buoyancy in expectations of respondents with regard to performance at the economy, industry and firm level in coming six months also indicated moderation. The proportion of respondents anticpating an improvement in performance over the Page 4

5 next two quarters noted a decline at the economy, industry and firm level. The decline, however, was most pronounced at the firm level. Corporate Performance remains muted Operational Parameters: Prospects over next six months (Proportion of respondents in percent) Investment Sales Profit Export Employment Higher Lower The actual quarter 1 results of corporate performance were not too encouraging this fiscal year and it seems the companies will still take some time to recover. An analysis of the responses received indicates that performance of companies is expected to remain subdued over the near term. Even though an increase was noted in the proportion of respondents citing an increase in investments and profits in the coming six months, this was offset by a corresponding increase noted in the proportion of respondents expecting these parameters to worsen over the near term horizon. In the current survey, 43% of the respondents said that they expect higher investments over the next six months, vis-à-vis 38% stating likewise in the previous round. However, the proportion of respondents anticipating lower investments went up marginally to 9% in the present survey from 3% last time. Likewise with regard to profits, while the proportion of respondents foreseeing higher profits increased to 37% in the current survey from 32% last time; those anticipating a decline increased to 17% from 3% in the last survey. In case of parameters like sales and exports a decline was noted in the proportion of respondents citing an improvement over the coming six months. As for the sales prospects, 66% of the respondents in the current round expected higher sales over the near term, vis-à-vis 73% stating likewise in the last round. Key constraining factors for businesses Weak demand persists to be a key constraining factor for businesses Page 5

6 % of respondents citing weak demand to be a concern 77% 71% Muted demand reflected in low capacity utilization rates and weak order book position Capacity Utilization (% of respondents) (% of respondents Less than 75% More than 75% Better Worse order book position vis-a-vis last two quarters Though the proportion of respondents reporting demand as a constraining factor noted a marginal decline in the present survey; nonetheless it continues to remain a concern for a significant majority of respondents. 71% of the participating companies reported weak demand to be a concern in the current survey round, visà-vis 77% stating likewise in the previous round. This is a worrying trend and is also reflected in the low capacity utilization levels and weak order book position of the companies. About % of the companies reported that their current capacity utilization rate is below 75%. Credit Situation Cost of credit still a concern for 58% of the respondents % of respondents Interest Rate being charged by Banks (in %) Credit Availability 32 Turnover (Rs crore) Working Capital Loan Six months At present One year At present Term Loan Six months One year up to Cost over Threat of Imports rise in proportion of respondents citing increasing imports to be bothersome % of respondents Page 6

7 Threat of Imports Year Respondents reporting imports to be a threat belonged to the following sectors - Yes No Steel and steel products - Electronic products - Agricultural Machinery - Paper products - Food processing - Plastic products - Textile Machinery - Chemicals Page 7