Business confidence dips to lowest in six years

13 Nov 2019

The survey by think tank NCAER showed that the Business Confidence Index fell 15.3% from the preceding quarter

The numbers suggest a deep and all-pervasive worsening of business sentiments NCAER said in a statement

New Delhi: Business confidence of India Inc declined to its lowest in six years in August-October according to the latest survey released by Delhi-based think tank National Council of Applied Economic Research (NCAER) on Monday.

According to the quarterly survey the Business Confidence Index (BCI) dipped to 103.1 falling 15.3% from the quarter ended July. The BCI was at 100.4 in October 2013.

“The numbers suggest a deep and all-pervasive worsening of business sentiments” NCAER said in a statement.

Indian businesses have been battling demand slowdown and liquidity crunch which resulted in economic growth rate cooling to a six-year-low of 5% in the June quarter while private consumption expenditure was at an 18-quarter-low of 3.1%.

The International Monetary Fund last month cut its growth forecast for India to 6.1% from 7% earlier for 2019-20 citing corporate and environmental regulatory uncertainty together with concerns about the health of the non-bank financial sector that has weighed on consumption demand.


On Friday rating agency Moody’s Investors Service cut India’s sovereign outlook to negative from stable citing lack of intent for reforms in India and a prolonged economic slowdown. It maintained a second lowest investment grade rating for India.

The BCI survey asks four questions with equal weight to the answers such as the overall economic conditions will be better in the next six months the financial position of firms will improve in the next six months the present investment climate is positive and the present capacity utilisation is close to or above optimal.

The fall in the BCI in October 2019 was driven by deterioration in sentiment across all four components NCAER said.

The steepest decline was for the component “the overall economic conditions will improve in the next six months” where the share of positive responses fell to 46.3% in October from 58.9% in July.

The percentage of respondents expecting “the financial position of firms will improve in the next six months” decreased to 39.3% in October 2019 from 48.8% in July.

The muted business sentiment was further reinforced as 32.5% of the respondents in October believed that “the present investment climate is positive compared with six months ago” while the component of ‘present capacity utilisation is close to or above optimal level’ dropped by 86.2% to an all-time low since July 2009.

Firms with annual turnover of less than ₹1 crore or micro firms was the only group that showed a slight upswing of 2% in BCI over the previous quarter.

Interestingly this was the only group that had shown a decline in BCI between April and July. Firms with annual turnovers of ₹10-100 crores registered the maximum fall of 20.6% in BCI followed by ₹100-500 crores and ₹1-10 crores firm groups with 17.6% and 14% respectively.

“Business sentiment regarding production domestic sales exports imports of raw materials and pre-tax profits remained subdued in October over July 2019 among all firm groups across industry type in line with the overall trends. The labour market outlook for the next six months continued to remain muted” NCAER said.

The other related survey of Political Confidence Index (PCI) released by NCAER fell 35.6% to its lowest since July 2013 after two consecutive increases. The number of positive responses on all the components assessed in this index fell between the two quarters of July and October 2019.

The eight components comprising PCI are “managing overall economic growth” “managing exchange rate” “pushing the economic reforms forward” “managing government finance” “managing conducive political climate” “external trade negotiations” “managing unemployment” and “managing inflation”.

Published in: Live Mint November 13 2019

Published in: Live Mint, November 13, 2019