Business confidence drops after rise in five quarters

The latest round of Business Today's business confidence index shows fall in confidence level of corporate leaders.

On a scale of 100, the confidence level stood at 60.4 in the fourth quarter of 2014-15, down from 62.2 in the last survey. The index surged for five straight quarters reaching its third-highest level in the third quarter since the survey began in January-to-March 2011.

The current fall in confidence level is the reversal of the trend observed over the past several quarters. Since October 2013, business sentiment had started improving and soared last year after the National Democratic Alliance (NDA) formed a stable government in May.

There was a sharp drop in the confidence level of services and light industry sectors. Except big businesses, all others businesses- medium-, small- and micro-sized-were less optimistic in the January-March period.

Even the outlook for April-June looks bleak, according to the survey. For example, 41 per cent of the respondents believed that the overall economic situation will become worse in Q1 of FY16. The comparative figures in the last two surveys were 22 and 11 per cent.

Other parameters such as production levels, sales pick-up, cost of raw material, utilisation of production capacity, and exports have also recorded a fall.

The survey shows that 35 per cent respondents are planning to make fresh investment in 2015-16, which is much lower than the last survey, when 67 per cent respondents expected fresh investment to pour in this year.

Aroon Purie, editor-inchief, India Today Group, said that the businesses are eagerly awaiting the economic growth to gather pace. "This slide in business confidence after rising for several quarters should sound a warning bell to the government.

They must increase the pace of reforms and announce some bolder measures to revive business sentiment. Also, ensuring timely implementation of the key measures announced in the budget will help."

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