Business Sentiment In India Falls Near Decade Low

The business sentiment in India fell to the joint-lowest level since comparable data became available in 2009, with companies worried over a cooling economy, government policies, regulation and water shortages, according to the IHS Markit India Business Outlook. Predictions of softer activity growth underpin downward revisions to the profits outlook, subdued hiring plans and relatively muted capex intentions.

Although a larger net balance of firms predict higher non-staff costs and output charges than in February, inflation expectations remain historically muted. Falling from +18% in February to +15% in June, the net balance of private sector companies foreseeing output growth in the year ahead matches the June 2016 reading and therefore is the joint-lowest since aggregate data became available in October 2009.

The figure equals the average for emerging markets, but is below that seen globally. Anecdotal evidence suggests that water shortages, public policies and weak sales have restricted sentiment in June. Companies are also concerned about potential rupee depreciation pushing prices for imported materials higher, a lack of skilled labour, likely tax hikes, financial difficulties and customers increasingly demanding discounts.

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