India slips to 7th position in business optimism ranking: Grant Thornton survey

India has slipped to the 7th position this quarter  in business optimism ranking in Grant Thornton’s International Business Report (IBR) survey. Last quarter, India was ranked second in the survey.

The survey was conducted in September before the government had announced its major reforms like  bank recapitalisation and infrastructure investments among others. The sample size of the survey is 2,500 businesses spread across 37 economies.

India has also slipped from its 1st position last quarter to 8th position this time in terms of revenue expectations. Businesses have expressed low confidence over expected revenue in the next twelve months with 75 percent respondents hoping for an increase in the revenue.

In terms of profitability, confidence has dropped with only 54 percent respondents showing optimism as against 69 percent in the last quarter.

Besides these, slight fall was also visible in expectation for an increase in selling prices and exports. The confidence for selling prices to increase has dropped to 5th position from the 4th, with only 47 percent businesses showing optimism. The optimism for exports to increase has dropped to 8th from the 6th, with only 31 percent confident about the increase in exports.

The survey said that India's biggest growth constraints are citing regulations, red tape and lack of Information and communication technology (ICT) infrastructure. For Indian businesses shortage of finance and lack of skilled labour are the major disadvantages.

"There was clearly signs of lag in the economy which caused the drop in ratings," said Harish HV, Partner – India leadership team, Grant Thornton India LLP.

The businesses are, however, optimistic about growth in employment and increase in investment in plant and machinery and Research & Development (R&D). About 54 percent respondents are confident about the increase in employment opportunities as compared to the earlier quarter's 51 percent.

For R&D investment, India now stands fourth with 44 percent expecting an increase in investment as against the earlier quarter's fifth ranking.

The firm believes that the steps taken by the government - bank recapitalisation, investment reforms and India's jump in the Ease of Doing Business ranking will help in bringing up India's confidence in business in the upcoming quarters.

"The government actions and reforms coupled with the significant jump in Ease of Doing Business Rankings should bring back optimism in Indian Business in the next few quarters," Harish HV said.

India leapfrogged to the 100th position in the World Bank's Ease of Doing Business rankings, jumping 30 notches from last year, in an endorsement of the string of reforms implemented by the Modi government.

The report also recognises India as one of the top 10 improvers in this year’s assessment, having implemented reforms in eight out of 10 Doing Business indicators.

Meanwhile, the global business optimism still remains high at +49 percent. However, this is lower than last quarter's numbers of 51 percent.