No change in business sentiment

India Inc seems to have got over the low ebb in their optimism levels, a survey by global business information and advisory firm Dun and Bradstreet (D&B) has revealed.

The composite Business Optimism Index by D&B has shown a 2 per cent dip for the quarter ending June 30, 2009, compared to the previous quarter. This is less than the 31 per cent dip seen in the same survey for the previous October to December quarter in 2008.

“While the index shows marginal improvement, sentiment continues to be dampened,” said Kaushal Sampat, Chief Operating Officer, D&B, India, in a press release.

“Less than expected growth in GDP numbers is likely to have dented corporate confidence. Decline in industrial production for two consecutive months (December and January) and in exports for five months in a row (October to January) remains a cause for concern,” he added.

Forthcoming parliamentary elections and stability of the next government at the centre will determine the expectations of India Inc in the next quarter, D & B said.

While the composite index captures the expectations of India Inc, there are other indices, which maps parameters like sales volumes, net profits, selling price, new orders, inventories and employees. Five out of six optimism indices registered decline in the reported quarter.

The index tracing sales volumes remains unchanged as the previous quarter, at 23 per cent, it is at the lowest levels since in the three months ended 31 March, 2002. This point towards subdued demand expectations by Indian business houses in the quarter under consideration.

Moreover, tapering net profit expectations in the three months under considerations saw the relevant index at 18 per cent a 27 quarter low.

With subdued demand, lowering input costs and extension of excise duty cuts beyond March 31, 2009, the index on sales prices dipped four per cent, the lowest since the first quarter of 2002.

The relevant index order books was also at a 27 quarters low at 25 per cent. However, the silver lining in the cloud is that 52 per cent of the respondents of the survey expect their order book positions to improve, which is an improvement over the previous quarter.

With lesser demand, inventories index increased by seven percentage points to 16 per cent, from the levels seen in the previous quarter. Moreover, the index on employment decreased by eight percentage points and stood at 13 per cent, compared to the three months in the quarter ended 31 December, 2008. This is because majority of the business houses surveyed do not anticipate any change in work force.