India business confidence picks up in January: Survey

Most respondents say business unaffected by the new government's policies

Business sentiment in India rose for the first time in three months to the highest since October 2015, as domestic orders strengthened at the start of the year, showed a survey by MNI Indicators. But, only 17 per cent of the respondents said their business performance was better under the new government, a possible indication that these companies expected faster reforms from the government.

The MNI India Business Sentiment Indicator, a gauge of current sentiment among BSE-listed companies, rose to 61.8 points in January from 60.7 in December. Sentiment rose in manufacturing and service sectors but declined among construction sector companies.

A reading above 50 indicates expansion while one below that shows contraction.

The January 2016 reading was 3.7 per cent below the January 2015 reading, showed the MNI survey.

On the impact of the Narendra Modi government on businesses, 17 per cent of the respondents said their business performance was better under the new government. Many said quicker clearance and implementation of business proposals were benefitting the business environment.

Nevertheless, 56.8 per cent reported their business had been unaffected by the government’s policies, while 4.3 per cent said business climate had worsened. A significant proportion, 22 per cent of the respondents, said it was too early to draw any conclusions.

While companies were more confident about the current business environment, their expectations for the next three months lacked spark. In January, the Expectations Indicator eased to 71.6 from 74.3 in December, 5.9 per cent down on the year.

Firms were also less bullish about production, employment and availability of credit over the coming quarter. One change from the previous months was that firms were more optimistic about demand. The Expectations Indicator for New Orders was up 2.6 per cent on the month. This is a tentative sign that the prolonged deterioration in domestic demand conditions may be coming to an end.

Commenting on the latest survey, Philip Uglow, chief economist of MNI Indicators, said, “On the whole the January survey was a little more positive, although not unanimously so. On the brighter side, the overall sentiment was up, supported by the first increase in new orders since last June. Against this production continued to trend lower and Export Orders Indicator weakened.”

He said while just under one-fifth of the panel thought the Modi government has had a positive impact on their business, over 50 per cent said that they had not seen any impact. “To change this perception, the government should quicken its steps at reforming the economy,” Uglow said.

MNI Indicators, part of Deutsche Börse Group, offers macroeconomic data and insight to businesses and the investment community.