Business Confidence Index Dips by 15.3% in October Quarter: NCAER Survey

The business sentiments across Indian industry have been steeply falling, according to the Business Expectation Survey conducted by the National Council of Applied Economic Research (NCAER), a premier economic policy research and macroeconomics think tank.

“Business Confidence Index (BCI), an indicator of business sentiments stood at 103.1 in second quarter of 2019-20 continuing its volatile journey, falling by 15.3 per cent in October on a quarter-on-quarter (q-o-q) basis, despite a small reprieve in July 2019. It fell by 22.5 percent on a year-on-year (y-o-y) basis in the second quarter of 2019-20,” stated NCAER.

NCAER has been conducting the Business Expectation Survey every quarter since 1991, which tracks business sentiments of around 600 Indian companies to compute Business Confidence Index.

The survey found that the fall in the BCI in October 2019 was driven by a deterioration in sentiments across all four components—the overall economic conditions will be better in the next six months; the financial position of firms will improve in the next six months; the present investment climate is positive; and the present capacity utilisation is close to or above optimal.

Furthermore, it has been revealed that the business sentiments have declined across sectors, region-wise, firm-wise and ownership-type wise.

The five sectors covered under the survey including Consumer Non-durables, Consumer Durables, Intermediate Goods, Capital Goods and Services, showed a deterioration of business sentiments. “The BCI of each of the sectors registered double-digit decreases of 11.4 per cent, 11.4 per cent, 21.4 per cent, 18.3 per cent and 13.1 per cent respectively (on a q-o-q basis) in October 2019,” stated NCAER.

Region-wise, three out of four regions (which include six big cities) showed a decrease in the BCI on a quarter on quarter basis between July and October 2019. It is found that the Western region comprising Mumbai and Pune cities, witnessed the steepest fall of 36.4% compared to last quarter, followed by the East (Kolkata) with a fall of 17%. The BCI of the Northern region (Delhi NCR) showed a decrease of 6.3% in October over July 2019. After falling for two consecutive rounds in April 2019 (8.7%) and July 2019 (6.7%), the BCI of the South (Bengaluru) increased by 2% in October 2019 on a quarter on quarter (q-o-q) basis.

Four of the five groups across firm-size showed decline in BCI figures between July and October. “Firms with annual turnovers of less than Rs 1 crore or micro firms was the only group that showed a slight upswing of 2 per cent in BCI on a q-o-q basis between the two periods. Firms with annual turnovers of Rs 10-100 crores registered the maximum fall of 20.6 per cent in BCI followed by Rs 100-500 crores and Rs 1-10 crores firm groups with 17.6 per cent and 14 per cent respectively,” says the survey.

Ownership type wise, while the BCI of public sector companies rose significantly by 15.6% between July and October, “Partnerships or individual owned firms showed the biggest dip of 21.5 per cent in BCI between the two periods, followed by the private limited and public limited companies with 14.4 per cent and 11.3 per cent respectively,” finds NCAER.

Source: NCAER

Furthermore, NCAER found that the Political Confidence Index (PCI) has also fallen by 35.6% in the second quarter of 2019-20 after two consecutive increases in April (12.4%) and July (18%). PCI is accessed using eight components including “managing overall economic growth”, “managing exchange rate”, “pushing the economic reforms forward”, “managing government finance”, “managing conducive political climate”, “external trade negotiations”, “managing unemployment”, and “managing inflation”.