India Inc. is in a funk. Neither the double-digit economic growth forecasts nor endless promises of reforms by the Narendra Modi government is lifting the spirits of Indian companies.
Sentiment among companies about new business activity, especially in the manufacturing and services sectors, has gone back to the grim levels of 2009—the days of the global economic crisis—according to the latest Markit India Business Outlook survey, conducted among 11,000 companies worldwide between June 12 and June 26.
The survey uses “net balance”—the difference between the number of negative and positive responses—to indicate the degree of future optimism or pessimism. A higher net balance suggests that more companies feel the outlook is positive. The current net balance at 22% is the lowest since October 2009.
Much of this bleakness is because companies are worried about competition, raw material shortages, increased taxes, and strong inflation.
“In all cases (in India), the levels of positivity have weakened since the February outlook period as forecasts of competitive pressures and higher cost burdens have weighed on confidence,” Markit economist Pollyanna De Lima said in the release.
“As a result, Indian companies have revised lower their expectations towards employment. Hiring is still foreseen, but the rate at which companies are willing to take on additional workers has moderated,” De Lima added.