India Inc Loses Faith

BT- C fore survey shows Business Confidence Index has slipped below the 50 mark in the last quarter

The confidence levels among India’s businessmen have reached a new low. According to the latest Business Today- C fore survey for April to June 2012, the Business Confidence Index ( BCI) has slipped to 49.3 on a scale of 100.

When the first survey was conducted for the first quarter ( January to March) of 2011, the confidence levels stood at 74.8. By the time of the last quarter, of January- March 2012, it had slipped to 55.4. This fall in the confidence index to below the psychologically positive 50 mark is worrying, as it signals a fall in hiring and expansion in the economy.

The sharpest decline in the confidence levels is actually among the small businesses, where it has fallen from 57.2 from the previous quarter to 50.5, on a scale of 100. Sectorwise, the heavy engineering industry appears to be the most pessimistic, scoring just 48.3 points.

Businessmen have often complained of the “policy paralysis” in the UPA Government, which has led to the problems currently faced by industry, of high interest rates, delays in project approvals, and uncertain land acquisition policies. Nearly 53 per cent of the 500 chief executive officers and chief financial officers polled have said that their profit margins were squeezed in the April to June quarter of 2012, and a massive 57 per cent of them expect the profits to fall further in the current quarter of July to September. Nearly 59 per cent executives say they do not expect their selling prices to pick up even though cost of raw materials has risen substantially.

With no major reforms having been announced by the UPA Government so far, the situation for the next quarter looks grim. Nearly 80 per cent executives polled in the survey do not expect demand to pick up in the July- September quarter. Fortyfive per cent expect the overall economic situation to worsen.

Recently, top corporates bosses like Ratan Tata and Azim Premji expressed hope that Prime Minister Manmohan Singh would push through positive economic reforms, starting with the contentious issue of foreign direct investment in multi- brand retail. He needs to deliver, if the mood of India Inc has to be lifted from gloom and doom.