Harish HV, Partner, India Leadership team, Grant Thornton India LLP talks to Sarika Malhotra about the business confidence in India. After being on top globally, on the scale of business optimism for last two consecutive quarters, India ranked third during the April-June quarter of 2016, according to the latest Grant Thornton International Business Report (IBR).
What are the reasons behind dip in business confidence in India?
Indian business is still optimistic compared to many countries in the world. However, the decline in business confidence is due to the slow pace of some of the key measures e.g. GST, tax reforms. NPAs have made the banks become wary of lending given the fear of investigations which may question bank officers using hindsight on decisions made in good faith based on information barring exceptions where decisions are made on other considerations. There was a lot of expectation on improvements in ease of doing business but the broad operating bureaucracy is still bureaucratic and suspicious of people and makes rules on that basis.
What segments are gravely impacted in India and why?
Primarily, infrastructure sector is impacted. With government's efforts and resolution of some lending issues through cooperation among borrowers, banks and government, we should see the sector reviving. IBR shows a decline in the optimism in India as far as investments in new buildings are concerned. Only 30 per cent of the respondents expect an increase compared to 51 per cent in the last quarter where India topped the chart.
Any guesses, how long will this scenario continue and by when is the revival expected?
I believe this is a temporary dip in business confidence and will get restored as soon as the government initiates actions on these fronts as the core economy is strong and opportunity is huge.
How do you compare the business confidence in India vis a vis China?
While India slipped to third position from the top on optimism scale, China ranks sixth from the bottom. As far as the profitability expectation goes, China ranks 13th from bottom (18 per cent) while India ranks second on the chart (56 per cent). After a long time, India showed clear rise in confidence for increase in exports (35 per cent) ranking second while China ranks ninth from the bottom with only 10 per cent expecting an increase. These are clear indicators of India's rising confidence and certainly, China is still going through a mild recovery.
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