Indian businesses are the most optimistic about the economic recovery in 2016. Stand taken up by the pro-reforms government, recent policy announcements and regulatory changes have resulted in increased confidence of the businesses. India has retained its #1 ranking again in the 4th quarter of 2015, a trend that was seen in the corresponding period in the year 2014 as well.
According to the Grant Thornton International Business Report (IBR) - a quarterly global survey of 2,580 business leaders across 36 economies, 89 percent of the businesses have shown confidence in the stable government and expect economic recovery in the last quarter of 2015. India was followed by Ireland and Philippines with 88 and 84 percent respectively.
The optimism, however, suffered a decline in the last few quarters due to slow growth of core sectors. The level of optimism has been continuously increasing with the second quarter witnessing 85 percent businesses expecting economic recovery. This was followed by 87 percent businesses indicating economic recovery in the third quarter.
The stability of the Indian economy can also be gauged from the fact that India tops the chart on expectations of an increasing revenue (92 percent), selling prices (73 percent) and profitability (76 percent).
While there is expectation of a recovery, corporate India continues to cite regulations and red tape as a constraint on growth with 74 percent of the respondents to the survey suggesting bureaucratic hurdle continues to be an impediment in growth. Here too India ranks highest in the IBR survey. This highlights the need for the government to remove regulatory bottlenecks and bring in place a mechanism for faster approvals.
The IBR also shows that 49% Indian businesses plan to ramp up investment in the new buildings and 52% plans to invest in plants & machinery in 2016. While 51% businesses expect an increase in R&D activities in the coming year, only 28% businesses are expecting country’s exports to grow. Indian businesses also plan to be on a hiring spree in the coming year as 68% businesses expect an increase in employment - ranking #2 in the survey, lack of skilled labour and finance continues to be top two concerns for Indian businesses.
“I personally believe that anyone who underestimates Indian economic growth would be proved wrong. We have a refreshed political will, stretched but resolute businesses, a buzzing start-up space, easing foreign capital policy and some significant legislative reforms in the pipeline - these are all positive indicators which could not have been imagined 2 years ago. The geopolitical tensions and the structural stress building up in the developed and emerging economies would continue to present both opportunities and the inherent threats. This survey also showed us how we were losing hope when India dipped in the rankings on the optimism index between 2011 and 2014 but we are back on top and 2016 should prove the sentiments right.” said Vishesh C Chandiok, National Managing Partner, Grant Thornton India LLP.
Globally, business optimism heading into 2016 stands at net 36% - only slightly down from Q3 2015 and just above the 35% recorded a year ago. For the first time since the financial crisis, it is the EU which provides the bedrock of stability. Net 38% of EU businesses are optimistic about their economy over the next 12 months, exactly the same as in Q3 and Q1. Meanwhile the US has seen optimism fall from 74% to 50% in Q4, the biggest fall of any of the 36 countries surveyed. 2016 also looks much brighter for businesses in Asia Pacific and Latin America as both report big quarterly increases in optimism.
“Businesses around the world suffered a dent to confidence in 2015 following uncertainty around the speed and the extent of China’s economic slowdown. That has subsided somewhat. Demand for raw materials and minerals will not reach the heights we saw in recent years but as the need for services grows in China, that creates new trade opportunities. We’re seeing this reflected in the uptick in optimism around the world.
The global economy continues to change and evolve, with shifting landscapes in major economies creating new challenges but also new opportunities. Those businesses with an instinct for growth will be best placed to spot these emerging pockets of opportunity, build new trade links, and make the most of the brighter outlook being reported for 2016,” said Ed Nusbaum, Global CEO, Grant Thornton.