India’s ranking rallies to 2nd position on business optimism index: Grant Thornton survey

Indian businesses continue to be optimistic backed by a buoyant economy and continued reforms which has also resulted in a very buoyant stock market According to the Grant Thornton International Business Report (IBR) survey, India’s ranking has rallied from 4^th to 2^nd position on the optimism index in the second quarter of 2017. The IBR finds that 94 per cent Indian businesses are confident of India’s economic growth story. While India continues to rise on the optimism index, China is still struggling to build the business confidence with only 48 per cent businesses displaying confidence in the economic growth for the second consecutive quarter.

The scale and the report are prepared basis the results of a quarterly global business survey of 2,600 businesses in 37 economies.

India also topped the chart on the ranking for revenue expectations with 78 per cent of the businesses in India expecting an increase. As far as the profitability expectation goes, 69 per cent of the respondents expect higher profitability, thus, bringing India on the 2^nd position on the chart from 6^th position in the last quarter. While the APAC region has witnessed an increase in exports expectations, in India, there hasn’t been any significant rise on this parameter. Only 34 per cent of the businesses surveyed expect an increase in exports. This reflects the weakening sentiment on IT exports which may have caused this dip.

While only 52 per cent respondents expect the selling prices to increase as against 55 per cent in the last quarter, India saw a jump of two places in the ranking for this parameter to 4^th position from 6^th in the previous quarter.  This may be nullified by the GST implementation. However, India has slipped to 4^th position from 3^rd in the last quarter in the ranking for employment expectations. There is a consistent fall in the employment expectations ranking in the last three quarters with 51 per cent expecting a rise in employment in Q2 2017 compared to 56 per cent and 62 per cent in Q1 2017 and Q4 2016 respectively. This continues to be a worry for the Indian Economy.

“After a slight dip in Q1, India is climbing the optimism charts faster, ranking 2^nd on the index this quarter. Indian businesses expect an increase in selling prices and higher revenue, both reflected in the booming stock markets. The Government continues to bring in transformational reforms such as GST which has given a further push to optimism.  The only worrying factor is the weak outlook on employment which we hope will give impetus to labour reforms. The other area which also needs to be addressed is exports,” said Harish HV, Partner – India leadership team, Grant Thornton India LLP.

The findings of the survey further show a decline in the optimism for investments in new buildings and plant and machinery. Only 40 and 42 per cent of the respondents expect an increase in investment in new building and plant and machinery respectively. However, there is a rise of two places in the optimism index for investment in R&D. The survey says that 35 per cent of the businesses surveyed are optimistic about an increased investment in R&D. 

At the global stage, the business optimism hit at an all-time quarterly high of +51 per cent in the second quarter of this year. This represents five consecutive quarters of increases in optimism. Healthy confidence is evident in the US, where optimism has hit an all-time high of 81 per cent; in the EU, which has jumped to a two year high (50 per cent); and in China, where optimism remains at 48 per cent - a near three year high.

Francesca Lagerberg, Global leader at Grant Thornton, says:

“It would be easy to analyse these figures as unbroken good news for the global business community. Optimism levels are at unseen-before highs, and firms expect to boost revenue and profits in record numbers too. A small uptick in export plans also reflects the fact that global trade levels are currently strong.”

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