India Inc’s sentiment has recovered from the blues of the economic slump caused by the Covid-19 pandemic—and how.
The Overall Business Confidence Index in India touched a decadal high of 74.2 points in the December quarter, the trade association Federation of Indian Chambers of Commerce & Industry (Ficci) said today (March 8). Nearly 30% of the survey respondents expect they will post higher profits in the first half of 2021 thanks to greater pricing power and recovery in demand.
The survey includes 190 Indian companies with a turnover between Rs1 crore ($136,986) to Rs1.37 lakh crore.
“Since the past few months, the green shoots of recovery are gradually strengthening. The pick-up in economic activity has broadened and the same is being reflected in the various lead indicators. The demand conditions, which have been a major cause of concern for a majority of businesses, are also seen improving,” Ficci said.
Respondents were also optimistic about a turnaround in global demand. Around 41% of respondents said that they see a higher uptick in exports between January and June this year.
India’s V-shaped economic recovery
The optimism is also making companies hire and invest more.
Around 35% of the survey respondents said they foresee hiring new employees between January and June. About 28% of them expect to see a more than 10% rise in hiring. This comes as the unemployment rate in India continues to recover, reaching pre-Covid levels in February.
Also, after a year of lockdowns and slowdown, Indian companies are now willing to invest in expanding capacities. Over 30% of participants in the Ficci survey said they expect “higher to much higher investments” in the first half of 2021.
This optimism comes in the backdrop of the Indian economy pushing itself out of a recession in the December quarter. The economy is expected to continue its upward trajectory, soon making India the fastest-growing country in the world.
While Indian companies are more optimistic about the future, they are also cognisant of the risks.
Indian companies are cautious
The recent spike in Covid-19 cases continues to weigh on India Inc’s mind. “The uncertainty surrounding a fresh surge in Covid-19 cases remains the topmost concern for the economy and corporate India. A further acceleration in the pace of vaccination should help maintain stability in the recovery process,” the report said.
Also, the availability of credit and high-interest rate still remain a major concern with banks and non-banking financial companies unwilling to lend freely.
So even as the future looks brighter, it’s clouded by present challenges for India Inc.