Business Confidence Survey Q1 2012 - FICCI

Business Confidence Survey Q1 2012 - FICCI

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  FICCI‘s Bus iness Conf idenc e Survey: Q 1 FY13 HIGHLIGHTS  The global economy is once again in a difficult situation. Amidst the current state of affairs, the latest round of FICCI’s Business Confidence Survey reveals the somber mood of India Inc. The Overall Business Confidence Index for the first quarter of 2012-13 at 51.8. The corresponding figure in the last survey round was 60.3 (Q4 FY12).  Interestingly, net responses with regard to prospect of employment opportunities has turned negative, the first time since the 2008-09 crisis. Thus, the current economic slowdown coupled with a negative growth in the employment prospects, may force the economy into a ‘jobless degrowth’  The respondents did not seem upbeat with regard to current performance and lacked optimism about future performance at all the three levels- economy, industry and firm level.  Weak demand continues to be a concern for members of corporate India. Nearly 73% companies reported weak demand to be a constraining factor. The corresponding figure in the last survey was 57% and a year back 56%. Also a significant proportion of participants in the current round indicated cost of credit to be a constraint  In the current survey, the participating companies were asked to indicate the expected GDP growth for the year 2012-13 on the back of uncertain conditions in the Euro Zone and the slowdown in the domestic economy. 50% of the respondents believed that the GDP growth could be less than 5.5%.  Further, a whopping majority of the respondents also indicated that the deficient rainfalls have had a clear impact on the performance of their industry/sector. About 85% of the respondents reported that the current drought situation would have an impact on their industry. FICCI Economics and Research Division 1
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  FICCI‘s Bus iness Conf idenc e Survey: Q 1 FY13 Survey Profile optimism about future performance as well. Responses indicate that the industry outlook for The current survey round was conducted for the the next six months is gloomy on the back of low first quarter of FY 13 and drew responses from investment, exports, profits and sales. companies with a wide sectoral and geographical spread. The participating In particular, employment opportunities have companies belonged to varied array of sectors turned worse for the first time since the Lehman such as textiles, cement, financial services, crisis. Thus, the current economic slowdown chemicals, metal and metal products, coupled with a negative growth in the automobiles, FMCG, electrical equipment and employment prospects, is likely to force the machinery. The survey was conducted between economy into a ‘jobless degrowth’. the month of July and August 2012 and brings out expectations of the corporate members for India Inc. expects the investment prospects the period July-December, 2012. to be weak over next two quarters… Detailed Survey Findings There is a considerable decline in the number of total responses who believe investments will be The latest Business Confidence Survey for Q1 higher over the next six months. FY 13 indicates a clear sign of a slowdown with moderation taking place at the economy, 42% of the respondents in the current survey industry and firm level. said that investments will remain same in the next six months as compared to 48% in the last Table 1: Prospects for the next six months quarter survey. As much as 25% of the Net Q1’12 Q4’11 Q3’11 respondents believed that investments will go respons down in the next six months as per the current es survey (vis-à-vis 11% last time). Expected Worse -12 36 -13 Economic Overall Business Confidence Index Slides… Situation Expected Worse 19 40 2 Exposition 1: Overall Business Confidence Industry Index Situation Investments Worse 8 30 18 Sales Worse 38 51 30 Selling price Better 12 4 -6 Profit Worse 0 5 -22 Exports Worse 19 22 22 Employmen Worse -4 21 7 t Source: FICCI’s Business Confidence Survey, Q1 FY13 Note: Net responses are measured as the differential between the companies reporting a positive and negative responses. Responses indicating status quo are not reckoned. Source: FICCI’s Business Confidence Survey, Q1 FY13 The respondents did not seem upbeat with The Overall Business Confidence Index for the regard to current performance and lacked 1
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  FICCI‘s Bus iness Conf idenc e Survey: Q 1 FY13 first quarter of 2012-13 stood at 51.8, much quarter. lower than the value of 60.3 reported in the previous quarter. Besides weak demand, increasing raw material costs was also reported to be a factor bothering Global Economy Still in Doldrums…. members of India Inc. About 62% of the companies participating in the survey reported The global economy continues to bear an that rising raw material prices was a worrying uncertain outlook. The difficult global situation factor for them. coupled with the unfavorable factors on the domestic front has clearly had an impact on the Further as per the current survey results, high performance of the companies. Poor cost of credit acted as a constraint for 62.5% of performance of the industrial production, the participating companies. persistent inflation and weak rupee has further added to the worries. Cost of credit was reported to be a greater concern for companies with a turnover ranging As per the market expectation, the GDP between 0-500 crore and 500-1000 crore. growth is likely to be around 5.4% in FY13….. For companies with a turnover between 0-500 In our current survey, the participating crore and 500-1000 crore, 63% and 80% of the companies were asked to indicate the expected participants respectively believed that the recent GDP growth for the year 2012-13 on the back of rise in the cost of the credit is a huge problem uncertain conditions in the Euro Zone and the for them. slowdown in the domestic economy. Table 3: Cost of Credit Company Turnover (Rs High cost of credit As can be seen from the table below, 50% of the crore) respondents felt that the GDP growth would YES NO remain below 5.5%. 0-500 63% 38% Table 2: Expected GDP growth (% of 500-1000 80% 20% respondents) 1000 and above 33% 67% GDP Growth 2012-13 Source: FICCI’s Business Confidence Survey, Q1 < 5% 19% FY13 5%-5.5% 31% 5.6%-6.0% 38% . >= 6% 12% Source: FICCI’s Business Confidence Survey, Q1 FY13 Only 12% of the respondents indicated that the growth would somewhere above 6%. Constraining factors…. In the present survey round, 73% of the respondents reported weak demand to be a constraining factor, compared to 56% reporting likewise a year ago and 57% in the previous 2
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  FICCI‘s Bus iness Conf idenc e Survey: Q 1 FY13 ANNEXURES FICCI FICCI FICCI FICCI FICCI FICCI FICCI BCS Q2 BCS Q3 BCS Q4 BCS Q1 BCS Q2 BCS BCS Q1 2010-11 2010-11 2010-11 2011-12 2011-12 Q4 2012-13 2011- 12 1a Current overall economic conditions vis-à-vis the last six months 82 57 47 16 16 38 7 Moderately to Substantially better 16 19 36 28 31 43 19 Same / No change 2 24 17 56 53 19 74 Moderately to Substantially worse 1b Expectations for overall economic conditions for the next six months 83 50 49 30 27 49 22 Moderately to Substantially better 16 38 38 37 33 38 44 Same / No change 1 12 13 33 40 13 34 Moderately to Substantially worse 2a Current industry performance vis-à-vis the last six months 77 57 46 23 18 47 26 Moderately to Substantially better 20 22 35 35 48 34 33 Same / No change 4 22 20 41 33 19 41 Moderately to Substantially worse 2b Expectations for industry performance in the next six months 80 54 62 35 33 55 41 Moderately to Substantially better 20 32 24 37 35 30 37 Same / No change 0 14 14 28 31 15 22 Moderately to Substantially worse 3a Current firm level performance vis-à-vis the last six months 78 68 60 31 32 47 36 3
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  FICCI‘s Bus iness Conf idenc e Survey: Q 1 FY13 Moderately to Substantially better 21 19 27 42 45 30 28 Same / No change 1 14 12 27 23 23 36 Moderately to Substantially worse 3b Expectations regarding firm level performance in the next six months 85 69 64 51 52 56 46 Moderately to Substantially better 15 22 29 24 25 34 35 Same / No change 0 10 7 25 24 11 19 Moderately to Substantially worse 4 Confidence Indices 75.2 63.5 62.3 46.3 47.4 57.4 45.7 Current Conditions Index 76.6 64.0 64.4 54.3 53.5 61.7 54.8 Expectations Index 76.2 63.8 63.7 51.6 51.5 60.3 51.8 Overall Business Confidence Index 5 Problem areas Weak Demand Yes 26 24 34 56 65 57 73 No 74 76 66 44 35 43 27 Threat of imports Yes 35 29 27 22 29 17 16 No 65 71 73 78 71 83 84 Constrained availability of credit Yes 21 17 20 24 20 23 24 No 79 83 80 76 80 77 76 High cost of credit Yes 46 53 55 68 58 47 60 No 54 47 45 32 42 53 40 Rising raw material prices Yes 79 90 85 70 78 79 62 No 21 10 15 30 22 21 38 6 Present capacity utilization Less than 25% 1 1 2 1 5 7 0 Between 25% and 50% 11 6 8 7 9 13 21 2
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  FICCI‘s Bus iness Conf idenc e Survey: Q 1 FY13 Between 50% and 75% 27 21 26 29 46 38 46 More than 75% 61 72 64 63 40 42 33 7 Prospects for the next six months Investments Much higher 8 9 7 3 4 7 4 Higher 41 45 40 39 33 34 29 Same / No change 47 33 38 42 44 48 42 Lower 4 13 16 16 19 11 25 Sales Much higher 7 7 9 6 2 13 0 Higher 67 62 55 52 42 53 50 Same / No change 26 27 28 26 42 21 38 Lower 0 4 9 16 11 13 12 Selling price Much higher 0 0 1 0 0 0 4 Higher 26 53 33 18 13 26 16 Same / No change 71 46 54 60 69 52 72 Lower 4 1 12 22 19 22 8 Profit Much higher 0 2 0 2 0 2 0 Higher 48 33 30 24 19 36 36 Same / No change 46 42 46 43 41 29 32 Lower 6 23 24 31 41 33 36 Exports Much higher 4 2 1 6 0 8 5 Higher 47 46 39 38 35 30 33 Same / No change 43 37 40 38 52 46 43 Lower 6 16 20 19 13 16 19 Employment Much higher 2 0 1 3 0 0 0 Higher 29 41 25 29 19 30 16 Same / No change 67 52 66 61 68 61 64 Lower 1 7 7 6 12 9 20 3