Private firms' biz confidence at six-year low: Markit data

Amid competitive pressure and cost burden, drop seen across BRIC nations

Business confidence among India's private-sector companies in June stood at +22 per cent (net balance), the lowest level since October 2009, showed the Markit India Business Outlook survey. Competitive pressures, raw material shortages, increased tax rates and strong inflation were seen as threats to the outlook, data for which were collected from June 12 to June 26 this year.

Net balance refers to the proportion of people expecting an increase in the next 12 months minus the proportion of those expecting a decrease

A drop in the confidence level was seen across manufacturing and services firms. The net balance fell from +28 per cent in February this year to 22 per cent for the services companies surveyed, and from +24 per cent to 20 per cent for the manufacturing ones during the same period.

Produced by Markit Economics, the Global Business Outlook for worldwide manufacturing and services is based on a survey of around 11,000 manufacturers and service providers who share their thoughts on future business conditions.

For India, a net balance of +22 per cent of companies forecast higher levels of new orders in the coming year, compared with a reading of +30% in the previous outlook survey. However, despite being the lowest in the survey history, the net balance for India was the same as the BRIC average.

In fact, a weakening in the overall business sentiment was seen across BRIC (Brazil, Russia, India and China) nations. The net balance of business activity in Brazil, for instance, dropped to +6 per cent, according to the latest survey, compared with +80 per cent in 2009. Similarly, Russia and China have also seen a drop since their respective 2009 levels. The European Union (EU) has, however, seen an improvement since 2009.

Revenues of Indian companies, too, are expected to expand at a lower rate - a net balance of +23 per cent in June, against +28 per cent in February.

Similarly, the degree of optimism towards profitability growth has weakened. A net balance of +22 per cent of Indian private-sector companies foresee higher profitability levels over the coming year, against a reading of +30 per cent at the beginning of 2015.

"Indian companies have maintained a positive outlook in June. Output, new business and revenues are all anticipated to expand over the course of next year. Nonetheless, in all cases, the level of positivity has weakened since the February outlook period, as forecasts of a competitive pressure and a higher cost burden have weighed," said Pollyanna De Lima, economist, Markit.

Though Indian companies foresaw further job creation in the coming 12 months, optimism dropped below the worldwide trend. The net balance for employment stood at +8 per cent, against a global average of +17 per cent.

"Hiring is still foreseen, but the rate at which companies are willing to take additional workers has moderated. This is the case in both the manufacturing and service sectors. Panelists have maintained the view that costs and charges will rise in the year ahead," De Lima added.