India Inc biz optimism rises after 4 quarters of fall

New Delhi: After a four-quarter slide, India Inc's business optimism registered an increase for the first quarter of this year, largely driven by GDP growth, easing FDI norms and RBI rate cuts, says a Dun & Bradstreet report.

The Business Optimism Index (BOI), which measures the pulse of the business community, improved to 85.9 for the January-March 2016 quarter, registering a rise of 2.5 per cent compared with first quarter last year.

"After a four-quarter slide, the D&B Composite Business Optimism Index for Q1 2016 provides tentative evidence that the recovery should slowly resume," Dun & Bradstreet India Senior Economist Arun Singh said. Optimism level for net profits, selling prices and level of employees saw an increase of 1 percentage points, while optimism for new orders rose by 4 percentage points.

"The acceleration in GDP growth, easing of FDI norms and rate cuts by the RBI could be partly responsible for the improvement in confidence level of corporate India in the recent period," Singh said. The increase in government spending has clearly raised hopes of a government investment-led recovery.

"A number of stalled projects have been de-bottlenecked and fast-tracked while hopes of a recovery in demand conditions have gathered strength particularly owing to Seventh Central Pay Commission payouts next fiscal," Singh added. He further noted for business confidence to get a sharp boost from hereon, the government should "shift up several gears from the slow drip-feed of reforms to targeted measures" that are aimed at encouraging investment and correcting structural deficiencies in the economy.

"Going forward, the measures announced in the Budget will also play a crucial role in shaping business sentiment," he added. For calculating the composite BOI, each of the six parameters -- net sales, net profits, selling prices, new orders, inventories and employee levels -- 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.