Indian business optimism dips over recent quarters: Thornton

NEW DELHI: Indian business optimism over recent quarters has dampened on the back of a tough economic outlook, yet 70 per cent of Indian businesses are upbeat on economic outlook, a survey says.

According to audit and advisory firm Grant Thornton's International Business Report (IBR) Indian business optimism has averaged net 70 per cent over the past four quarters, well below pre-crisis levels (97 per cent in 2007) and down even on the 2009 figure (83 per cent).

However, it remains well above the BRIC average (33 per cent).

The survey noted the 2013 average investment expectations by companies stood at 43 per cent, above the BRIC average (38 per cent) but below the pre-crisis levels (56 per cent).

Findings of the survey was substantiated by recent growth forecasts issued by the International Monetary Fund, which had warned that global expansion was being hampered by the slowdown in emerging economies like Brazil, China and India.

"Clearly businesses should not write off emerging economies in their search for growth as the fundamentals of these economies are still strong," Grant Thornton Partner India Leadership Team Harish HV said.

However, "BRICs and other frontier markets need to tackle issues such as rising inflation, operating environment for businesses and substandard infrastructure if they are to maintain the rapid growth we've seen in recent years and avoid the so-called 'middle income trap".

However, hiring plans of Indian businesses are bullish. In the year 2013, net 68 per cent of companies said they expect to add to their workforces, up from 64 per cent in 2012 and well above the BRIC average (31 per cent).

Moreover in India, net 64 per cent of business leaders indicated an intention to raise prices in 2013 and 30 per cent expect to raise worker salaries above the prevailing rate of inflation.

"This suggests a real danger of a 'wageprice spiral' taking hold: a vicious cycle where salaries rise to meet price increases forcing businesses to raise prices further to maintain real profits and so on," the report added.