Business confidence for the April-June quarter of this year declined marginally as weak consumption and investment demand kept mood subdued, says a survey.
The metric saw a pick-up compared to the previous quarter, but fell 2.6 per cent as against the same period of the previous year. The Dun & Bradstreet Composite Business Optimism Index stood at 78.9 during April-June of 2017, down 2.6 per cent from a year ago.
The index for January-March of 2017 had plunged to a 31-quarter low owing to severe cash crunch. "With remonetisation causing currency in circulation to rise, the concerns of demonetisation are gradually dissipating and this is reflected in the moderate pick-up in business confidence for the second quarter of 2017 as compared to the previous quarter," Dun & Bradstreet India Lead Economist Arun Singh said.
Moreover, the outcome of recent state elections and the imminent materialisation of structural reforms in the form of a planned rollout of the GST have boosted investor confidence.
About the year-on-year decline in business confidence, Singh said "yet, the underlying weak consumption and investment demand continue to keep business sentiment subdued as compared to the previous year's level".
He further said that while the imminent implementation of the GST will bring ease to an otherwise complicated tax structure, it has triggered uncertainty in India Inc, particularly in the MSME segment, which may not be immediately ready for technological and other changes that the GST would necessitate.
"Going forward, development on the implementation of the GST, along with the rising probability of El Nino and its implications for food inflation, and supply management measures will play a key role in shaping business sentiment," he added. The index, measures the pulse of the business community and is arrived at on the basis of a quarterly survey of business expectations.
For calculating the composite BOI, each of the six parameters -- net sale, net profit, selling price, new order, inventory and employee level - is assigned a weight. The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism index.