Indian biz activity to fall 30%, worst in world: IHS

MUMBAI: The coronavirus disease 2019 (Covid-19) pandemic led to a steep drop in confidence among companies in India in June with sentiment negative for the first time in nearly 11 years of IHS Markit data collection.

With business activity expected to decrease and a negative outlook for profits signalled, firms are set to cut staffing levels. Input costs are predicted to fall while output prices were forecast to rise only slightly amid weak customer demand.

IHS Market said on Monday the business activity net balance fell sharply to minus 30% of companies in June from plus 26% in February.

This was the lowest reading on record and the first time that a negative outlook has been signalled since the series began in late-2009.

Moreover, Indian companies were the most pessimistic of the 12 countries for which comparable data is available.

Pessimism was largely a reflection of the spread of Covid-19 across India and the prospect of pandemic continuing for some time to come.

Several firms indicated that if the outbreak was brought under control then this would provide a strong opportunity for growth.

However, many respondents indicated that the outlook was unusually uncertain and were subsequently unsure of how activity would develop over the coming 12 months.

"Alongside output, profits and employment appear set to fall with investment plans scaled back relative to earlier in the year. There appears to be little light at the end of the tunnel at present," said Andrew Harker, Economics Director at IHS Markit.

"Moreover, the outlook for India was the worst globally, indicative of the country still being some way from seeing the peak impact on economic activity of Covid-19," he said.

Indian companies look set to respond to falling activity by scaling back workforce numbers.

The employment net balance turned negative for the first time in the survey's history in June, falling to minus 23% from plus-14% in February.

The global business outlook survey for worldwide manufacturing and services is produced by IHS Markit and is based on a survey of around 12,000 manufacturers and service providers that are asked to give their thoughts on future business conditions.

The reports are produced on a triannual basis with data collected in February, June and October.