A SENSE OF GLOOM
A majority saw a deterioration in the business environment in the April-June quarter
the investment cycle is some distance away. “There’s still excess capacity in the system, and hence no urgency to make fresh investments. Private investments will likely remain weak for a while. I see an uptick in the same when manufacturing capacity utilisation crosses 85 per cent,” says Siddhartha Sanyal, Director and Chief India Economist, Barclays Bank Plc.
With investment growth in the corporate sector slowing down to record lows in 2016/17, 86 per cent respondents do not plan to make fresh investments over the next six months.
The survey shows that 36 per cent of respondents expect the production level to worsen in the July-September period. In the previous survey, only 20 per cent respondents felt so. The Index of Industrial Production ( IIP), a leading economic indicator, has dipped to 1.7 per cent in May from 8 per cent a year ago, owing to poor performance of the manufacturing and mining sectors.
“The cycle of weak production level, lower capacity utilisation and lack of investment appetite has not broken,” says Joshi.
The survey captures the mood of businesses of all sizes – big, medium, small and micro. The sentiment has deteriorated across businesses, especially for medium and small-size enterprises. Confidence levels have plummeted for heavy engineering, light industries and services sectors in the latest survey.
As per the survey, hiring has shown the maximum deterioration among all parameters. For instance, 74 per cent respondents – as against 26 per cent in the previous survey – foresee hiring activities to weaken in the current quarter.
From those surveyed, 67 per cent think that GST will negatively impact consumption. The common fear among businesses is that most items are falling under the 18 per cent tax bracket which could jack up the prices of goods and services. However, some hold a different view. “I don’t expect any notable negative impact of GST on overall consumption on a sustained