• India ranks 6^th on the optimism index in Q1 2018

• Ranked 9^th in exports expectations

While entering the last year of the current regime, the business optimism in India has deteriorated with the country ranking 6^th globally on the optimism index in the first quarter of 2018, says Grant Thornton’s International Business Report (IBR), a quarterly global business survey. India has been topping the chart since the new government came into power in 2014 (refer to the graph). However, the confidence has shaken since Q3 2017 with weakening currency and a surge in oil prices (Q3 – 7^th, Q4 -5^th 2017). In contrast, globally, the business optimism is at an all-time high. The IBR finds that in Q1 2018, global business optimism stands at net 61 per cent - the highest figure recorded in 15 years of research.

The scale and the report are prepared based on the results of a quarterly global business survey of 2,500 businesses in 37 economies.

Vishesh C Chandiok, CEO, Grant Thornton India LLP said:

“The reversal in sentiment amongst mid- sized business in India in the last 3 quarters is startling and I hope policy makers will sit up and take note. With oil climbing, and India firmly in an election year, we ought to brace for a volatile economic environment in the days ahead. Export oriented businesses should see better days, finally.”

The underlying pessimism is reflected in other parameters as well including revenue, selling prices, profitability, employment and exports expectations. Revenue expectations have been slipping from top position in Q2 2017 to 8^th in Q3 and 14^th in Q4. India’s ranking on expectation for higher selling prices has been dipping from Q1 2017 when the country ranked 6^th on the global rankings and by Q4 of the year, India slipped to 22^nd position. The country is at 7^th position in Q1 2018 with 51 per cent respondents showing positivity for an increase in selling prices. Employment expectations also dropped to 15^th position in Q4 2017 and ranked 6^th in Q1 2018.  India’s profitability expectations ranking has dropped to 7^th position in Q3 2017 and 24^th in Q4 2017. Even in the Q1 2018 ranking, the country stands at 13^th position on this parameter. As far as exports expectation is concerned, India ranked 11^th in Q4 2015, 18^th in Q4 2017 and 9^th in Q1 2018.

While Indian businesses have shown interest in investing in new buildings over the last couple of years, they haven’t given much impetus to investment in plant and machinery. India was most optimistic about investment in plant and machinery in Q1 2015 where the country was at 3^rd position and lowest in the last quarter and Q1 2018 (31^st and 30^th position, respectively). When it comes to investment in Research & Development, India’s ranking has been in the range of 5-6^th position since 2014. However, this parameter witnessed a drastic fall in Q4 2017 and Q1 2018 sinking to 24^th position.

Indian businesses have been citing regulations and red tape, availability of skilled workforce, lack of ICT infrastructure and shortage of finance as the biggest growth constraints. Even after India’s significant jump in World Bank’s Ease of Doing Business ranking, the country still continues to rank 1^st or 2^nd in quoting these reasons as the key hurdles for growth.

Commenting on the global optimism being at an all-time high, Francesca Lagerberg, Global Leader Network Development at Grant Thornton, said:

“Businesses report healthy and widespread levels of optimism. This is a welcome indication that the global economic recovery is finally broad based. We haven’t seen such high optimism levels for some time, not least in Spain, Italy and Greece. Why is business optimism so high? A likely factor is that globally; the economic fundamentals are strong. The strongest they have been since the financial crisis. GDP growth in most regions is growing. We are seeing a broad-based and inclusive spell of economic growth across markets.”

Please click here to view our global press release. Please find attached a detailed chart on the business optimism trend in other parameters.