Business optimism has witnessed an increase in the ongoing quarter supported by various measures taken by the government and the RBI to boost consumption demand during the festive season, says a survey. The fall in active cases of COVID-19 infected persons and the improvement in recovery rate also supported the business sentiment.
The Dun & Bradstreet Composite Business Optimism Index stood at 46.2 for October-December 2020, registering an increase of 57.4 per cent as compared to the third quarter. The index is arrived at on the basis of a quarterly survey of business expectations. The latest survey was carried out in September and October and covered 350 chief executive officers and managing directors.
The survey however revealed that optimism of respondents in the services sector has remained subdued and lower than the industrial sector across all parameters including sales, new orders, net profits, level of selling price and employees. "The improvement in the optimism level amongst businesses in the manufacturing sector emanates from the surge in demand as more economic activities were allowed under 'Unlock 4.0 and 5.0'," said Arun Singh, Global Chief Economist, Dun & Bradstreet.
Singh further said the various measures taken by the Reserve Bank of India (RBI) and the government to boost consumption demand during the festive season, and the investment demand by allocating additional funds for capex of the central government, providing states interest free capex loans and buying state development loans, might also have strongly driven the optimism levels.
"Further, the fall in active cases of COVID-19 infected persons and the improvement in recovery rate have also supported the sentiment of businesses. If the optimism level amongst businesses continues to improve, it will indicate a steady recovery in growth; a fall in the levels will signify any recovery to be only short-lived," Singh said.
Five out of six optimism indices have registered an increase as compared to September quarter 2020, the survey said.
Around 53 per cent of the respondents expect volume of sales to increase in December quarter, as compared to 24 per cent in the preceding quarter, while 40 per cent expect an increase in net profits in the period under review as compared to 27 per cent in July-September.
On the price front, 81 per cent respondents expect no change in the selling price of their products in fourth quarter while 12 per cent expect the selling price of their products to increase during the period and 7 per cent expect a decline.
The survey further noted that around 43 per cent respondents expect their order book position to improve in December quarter as compared to 22 per cent in the preceding three-month period, while 24 per cent of respondents expect their inventory level to increase as compared to 11 per cent in third quarter.
However, 15 per cent of the respondents expect an increase in the size of their workforce employed during October-December compared to 16 per cent in the preceding quarter. While around 77 per cent anticipate no change in the number of employees, 8 per cent expect their workforce size to decline.