Business sentiment down across all parameters, may improve, says report

Business sentiment weakened across all parameters in micro and small manufacturing and services enterprises in the April-June quarter, a joint report by CRISIL and Small Industries Development Bank of India has shown. Sentiment is the weakest in the past seven quarters, in line with the falling rate of economic growth, the report shows.

Most pronounced moderation was observed in capacity utilisation, production volumes, and new orders, in comparison to the same quarter a year ago. But these parameters, along with profit margins, could marginally improve in the current quarter (July-September), the CriSidEx index shows.

The index dropped from 127 a year ago to 120 in the April-June quarter. CriSidEx is a qualitative measure of the mood of the services and manufacturing sectors. On the CriSidEx scale, 0 indicates extremely negative sentiment, 100 signifies a neutral sentiment, while 200 indicates an extremely positive sentiment.

Consumption slowdown stemming from higher ownership cost, axle norms, and inventory build-up pushed down sentiment in the auto and the auto-components sector. As the quarter witnessed general elections across the country, low rate of new tenders in capital goods segment pushed down activity, the report said.

Further, cautious outlook on export demand of apparels and textiles owing to tepid global growth hurt the labour intensive sector.

The same quarter saw GDP growth stumble to six-year-low, at 5 per cent year on year.

The current quarter could bring good news for chemicals, metals, pharma sectors, and a host of commercial services companies, the survey noted. 

However, gems and jewellery, auto, real estate would still remain subdued, it said.

While imports remain subdued and lenders (banks and non-banking financial companies) are unwilling to up the ante, asset quality of loans has improved marginally, the report noted. Hiring in some sectors rose, too, it said.

Bigger companies were better adjusted to handle the slowdown, and those in the eastern states were least hurt by the sentiment, said the report.