Hit by a prolonged economic slump, the business sentiment among micro and small enterprises (MSEs) slid sharply to 106 in the quarter ended September 30, from 120 in the April-June quarter, according to CRISIL-SIDBI survey (CriSidEx).
The reading on the index for January-March 2019 was 122; it was 128 in the October-December 2018 quarter and 124 in the July-September 2018 quarter.
Amish Mehta, chief operating officer, CRISIL, said the findings for the September 2019 quarter need to be viewed in the context of macroeconomic factors, such as production cuts by automobile manufacturers impacting utilisation of components.
There was also a decline in both volume and realisation in commodity-linked sectors, such as steel, and a slowdown in consumption, impacting gems & jewellery industry and hotels, he said.
The survey showed the expectation from the next quarter — October-December — is higher than actual sentiment in the quarter in focus. The difference between reading for the December 2019 quarter (129) and the actual (106) is biggest, so far.
The production and capacity utilisation is likely to remain stable the next quarter as 28 per cent of participants from manufacturing MSEs expected an increase in production, 65 per cent viewed it as unchanged, and 7 per cent expected it to be lower.
Hiring was muted as only 7 per cent of the MSEs reported additions to their employee base in SQ8, compared with 16 per cent in SQ7, while 87 per cent maintained the base and 6 per cent reported reductions.
Lenders have a below-par outlook on the business situation. In the September quarter, only one of 10 lenders surveyed saw an improvement in the overall business situation of MSEs; four of 10 rated it as satisfactory, and 5 of 10 reported it as below satisfactory level, it added.