Business sentiment for Q2 2013 turns cautious

The recent spate of macro- economic data seems to have had an impact on the country's business climate as corporate India's optimism index for the second quarter of this year has declined and turned "cautious", says a Dun & Bradstreet report.

The Business Optimism Index (BOI), which measures the pulse of the business community, decreased by 5.6% vis-a-vis the year-ago period to 141.6 points during the second quarter of calender year 2013.

In comparison to the first quarter of 2013, the BOI was down by 3.5%.

"The recent spate of macro-economic data does not instill hope of rapid improvement in growth momentum and have begun to weigh on India's business sentiment," Dun & Bradstreet President & CEO - India  Kaushal Sampat said.

Sampat further added that "factors such as high fiscal deficit, dismal investment activity, high current account deficit, weak consumer spending and inertia in policy reform have led to deterioration in the business climate. The political uncertainty has also compounded the problems of weak business optimism."

For calculating the composite BOI, each of the six parameters -- net sales, net profits, selling prices, new orders, inventories and employee levels -- is assigned a weight. The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.

The subdued business confidence of Indian corporates was reflected in new order expectations, which declined four percentage points as compared to Q2 2012. The optimism for selling prices also registered an yearly fall of nine percentage points.

According to the report, the employment scenario in the country is likely to be muted in the coming quarter, as more than half of the respondents (54%) anticipate no change in the size of their workforce employed during Q2 2013.