Business confidence in Indian industry declines by 40 pc during past four months

NEW DELHI, Aug 10: Business Confidence Index (BCI), an indicator of business sentiment across Indian industry, fell by 40 per cent in the First Quarter (Q1) of Financial Year (FY) 2020-21, according to the National Council of Applied Economic Research (NCAER).

This is the lowest that the BCI has ever fallen since 1991 in the history of 113 rounds of the NCAER survey. NCAER, India’s premier policy research body and think tank, has been carrying out the Business Expectation Survey (BES) since 1991 on a quarterly basis.

According to the NCAER, the BCI was 46.4 in Q1 of 2020-21, a drop of 40.1 per cent from 77.4 in Q4 2019-20, The latest, 113th Round of the BES, was carried out in June 2020 when the country had started slowly opening up after more than two months of lockdown due to the outbreak of COVID pandemic.

By the time the BES was fielded, the Index of Industrial Production for April-May on a year-to-year basis had fallen by 46.2 percent and Manufacturing by 53.2 per cent.

The BCI is driven by four components, with equal weights in the Index : ‘overall economic conditions will improve in the next six months’, ‘financial position of firms will improve in the next six months’, ‘present investment climate is positive as compared to six months ago’ and ‘present capacity utilisation is close to or above the optimal level’.

The BCI for consumer durables sector fell by 38.2 per cent, for consumer non-durables sector by 41.4 per cent, for intermediate goods sector by 60.3 per cent, for capital goods sector by 30.7 per cent and for services sector by 35.2 per cent.

Region wise, the BCI for North India (represented in the BES by Delhi NCR) increased by 25.1 per cent in Q1: 2020-21 over that of Q4: 2019-20, for East India (represented by Kolkata) and West India (Mumbai and Pune) fell by 89.3 per cent and 68.1 per cent respectively over those of Q4 in FY 2019-20. The BCI for South India (Bengaluru and Chennai) in July 2020 was 53.9 per cent

Fall in employment of skilled labour increased from 4.3 per cent in Q4 FY 2019-20 to 18.2 per cent in Q1 FY 2020-21.

The BES’ Political Confidence Index (PCI) fell from 73.7 in Q4: 2019-20 to 63.1 in Q1:2020-21, Five components showed deterioration in the PCI. These include ‘managing overall economic growth’, ‘managing government finance’, ‘managing a conducive political climate’, ‘external trade negotiations (both bilateral /multilateral)’ and ‘pushing economic reforms forward’.

However, business sentiment improved on three components including managing inflation, managing unemployment, and ‘managing the exchange rate, the NCAER said.
(UNI)

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