CFOs’ business confidence at five-quarter low: Survey
Aftershocks of demonetisation and worries related to the goods and services tax (GST) implementation have rattled business confidence among India’s chief financial officers (CFOs) in the July-to-September period.
Confidence in the financial and macroeconomic conditions for July-September has declined to a five-quarter low, with composite CFO Optimism Index slipping by 11% on an annual basis and by 5.7% on a sequential basis, according to the Dun & Bradstreet India CFO survey, which covered 300 respondents.
The report said optimism among CFOs deteriorated more for the financial performance of their companies than the country’s overall macroeconomic condition. India’s economy expanded 5.7% in the June quarter, its slowest pace in three years, from 6.1% in the three months ago period, according to official figures released in August.
Manish Sinha, managing director, India, Dun & Bradstreet, said, “Concerns related to subdued domestic and weak external demand, strain in corporate balance sheet, stressed assets in the banking system and the pressure on public finances appear to have contributed to the lower optimism level. For some CFOs, execution of the GST system seem to have taken a toll on their optimism scores.”
Technical glitches continued to hound businesses on the last date for filing goods and services tax (GST) returns for August, the second month of the historic indirect tax reform that policymak- ers pinned their hopes on for boosting the economy’s competitiveness and growth rate.
About 25 difficulties that businesses grapple with while using the IT network supporting GST has been flagged to Infosys Ltd, the firm that built the network for GSTN, which is responsible for processing indirect tax returns.
Finance minister Arun Jaitley on Wednesday said much of the problems were “self invited” by some of the assessees, who wait for the last date to pay taxes and file returns. Jaitley said that only 25% of the 8.5 million registered assessees had paid taxes and filed returns for August as of Tuesday night, whereas the last date for this is Wednesday.
“The capacity of the system is 1 lakh returns per hour. The maximum that could be handled around the clock is 24 lakh returns. If 75% of the assessees wait for the last date, obviously they will invite trouble. Till last night, there was no trouble,” said the minister, while appealing to taxpayers to meet their tax obligations well in time.
Economists said that when aggregate demand in the economy for goods and services improves, business confidence will also pick up. “The government could consider maintaining fiscal deficit at 3.2% in 2018-19 rather than trying to bring it down to 3% as per the fiscal consolidation roadmap. Secondly, resources could be raised through disinvestment and public sector enterprises could go for expansion of their capital spending,” said DK Joshi, chief economist at rating agency Crisil.
The government is considering measures to spur the economic growth rate which has faltered to 5.7% in the June quarter.
A finance ministry official, who asked not to be named, said that if global economic growth picks up momentum, it will fuel manufacturing activities in India as well, although reviving the lost pace is a tough task.
Sinha said that further strain in corporate balance sheets has added to the already weak risk appetite of CFOs, consequently their expansion plans remain muted, which also has an impact on the optimism score.