Indian businesses are the most optimistic about economic recovery in 2017: Grant Thornton survey

With demonetisation, the business optimism in India has seen a new high. As per the latest Grant Thornton International Business Report (IBR) survey, Indian businesses are most optimistic about economic recovery in 2017. India ranked second on the optimism index during the third quarter (July-September 2016) and has taken further leap to first position this quarter with 88 percent of the respondents voting for it. The country continues to retain its number one position in the fourth quarter of 2016, a trend that was seen in the corresponding period in the year 2015 and 2014 as well.

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

The rise in optimism in India can also be gauged from the fact that India tops the chart on expectations of an increasing revenue (89 percent) where it slipped to third position in the July-September quarter. The country also ranked number one on the parameters of employment expectations (62 percent) and selling prices (68 percent). India Inc.’s profitability expectations further moved to second position from rank three in the third quarter and fourth position during the second quarter of 2016. 

“India continues to stand out as the one economy which has huge potential to continue to grow and this is reflected in the survey where Indian businesses are most optimistic and high on expectations of increasing revenue, employment, profitability.  This is a great time for the policy makers to look at unleashing the next generation of reforms apart from GST mostly focussed on ease of doing business and minimum government maximum governance. That requires a change in mind-set among the policy makers and implementing reforms in the legal system and contract enforcement (India’s poorest ranking is in contract enforcement in the doing business ranking).

There is an overall increase in global optimism which augurs very well for India in terms of attracting investments and providing markets for Indian products and services globally,” said Harish HV, Partner – India leadership team, Grant Thornton India LLP.

While business confidence in India is rising, the optimism for an increase in exports has plummeted. According to the survey report, 28 percent of the respondents expect an increase in exports, which is 10 points lower than previous quarter (38 percent voted for an increase in exports during Q3 2016).

Although India ranks third on citing regulations and red tape as a constraint on growth, there is a constant decline in the number of respondents citing this as an impediment to growth. 57 percent of the respondents have quoted this as an obstacle against 59 percent and 64 percent, in the third and second quarter of 2016, respectively. The survey further highlights that lack of strong ICT infrastructure, shortage of orders, unavailability of workforce and shortage of finance are the biggest concerns for Corporate India. 

According to IBR, 38 percent of the respondents are expecting an increase in investment in R&D activities. Though it shows a decline from the last quarter (43 percent), on an average, there is an increase in optimism for R&D activities in 2016. The survey further shows no change in the confidence of an increase in investments in new buildings from the last quarter. 42 percent of the respondents are expecting an increased investment in new buildings in this quarter as well. When it comes to investment in plant and machinery, 50 percent respondents expect a rise as against 46 percent in the third quarter.

Globally, business optimism at the end of Q4 2016 stands at net 38 percent. This is an increase of five percentage point from Q3 and the highest level since Q3 2015. In the US, optimism has increased from 43 to 54 percent - and the trend is repeated around the globe. The world’s two other big economic blocs, China (30 to 46 percent) and the EU (28 to 34 percent), have reported similar jumps.

Francesca Lagerberg, Global leader at Grant Thornton, commented:

“We have clients in over 140 countries and from conversations with our people, can say that uncertainty was the business buzzword of 2016, and much of that came from Brexit and the US presidential election. That uncertain period is gone now, and knowing the results will allow businesses to have a clearer steer on such key issues such as taxes, jobs and trade policy.”

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