Highlights:
- Research shows Indian companies have pessimistic outlook on recovery
- In nearly 11 years first time the research has shown a negative sentiment and a drop in confidence
- The net balance has dropped by 56% going in negative
The demand disruption which has been caused by the novel Coronavirus has considerably impacted the business confidence of the Indian firms. The HIS Markit’s tri-annual survey presented a nosedive in the confidence among the firms in India in the month of June, as the sentiment goes negative for the first time in almost 11 years of data collection.
The business activity Net Balance saw a steep decline to -30% of companies in June while it was +26% in February.
The New Balance is calculated by subtracting the percentage (%) number of respondents expecting a decrease or deterioration in a variable over the coming 12 months (or 1 year) from those expecting an increase or improvement.
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With this, the Indian firms came out to be the most pessimistic of the companies from 12 countries of which comparable data is available. Additionally, the outlook for profits in the country was the worst of the countries covered in this study.
Consequently, many companies continue to look to scale back on the workforce in India, the report sais, “as was the case with business activity, the outlook for staffing levels in India was the lowest of the 12 countries covered. Both the manufacturing and service sectors recorded pessimism in terms of employment, with service providers registering a greater degree of negativity,”.
Andrew Harker, HIS Markit’s Economics Director, while commenting on the Survey, said, that the outlook for the Indian companies was the world when compared to the global average, which indicated that it is still some way from seeing the peak impact on the economic activity of the novel Coronavirus outbreak.
In the mid-year outlook published on the 10th of July, global financial consultant and research house Nomura said that it was negative on India among its Asian peers when it comes to the pace of the recovery on the economy.
The report said, “We expect COVID-19 to amplify the financial sector weakness, worsening nonperforming assets and slowing potential growth. A weaker pace of recovery in 2020 will mean more policy support is likely, both monetary (50bp cut) and fiscal,”.
One basis point (bp) is one-hundredth (1/100) of a percentage point. India’s key rate – the repo rate at 4% – is at its historic low. Also, the COVID-19 cases in India are increasing daily which has now made India the 3rd worst-affected country in the world by the pandemic, pointing that the recovery may come even late.
