Lower optimism in manufacturing as fewer companies expect improvement in next 12 months: Markit survey

MUMBAI: The optimism that engulfed corporate India after the 2014 elections is gradually waning. Business confidence tracker Markit India’s latest outlook survey reveals that fewer companies expect improvement in the next 12 months. Markit measures business confidence by deducting the number of pessimistic respondents from the number of optimistic companies.

The net difference slipped to 26% in February, compared with 35.4% in February 2014 and 34.6% in October. The 26% net balance is the lowest in the past one year and below the BRIC and global averages. The degree of optimism was lower in the manufacturing sector, with the net balance at 24% in February compared with 30.2% in October. The services sector was at 28%, down from 36.5% four months earlier.

The biggest damper for India Inc is inflationary pressures in the coming months. “Optimism in the private sector has deteriorated since October 2014. Companies expect higher input prices in 12 months’ time, with the rate of cost inflation in India anticipated to be stronger than the global average,” according to Pollyanna De Lima, an economist with Markit.

Decline in overall outlook is marginal -- about 63% of the respondents are optimistic compared with 67.3% in October and 67.7% in February. The survey also brings out contrast in business outlook prevailing in India and China. Business confidence in China is at a one-year high of 30%.