Business sentiment in the country hit an over two-year high in the September quarter (Q2) of the current financial year (FY22) as the second wave of Covid-19 eased off, according to a survey by the National Council of Applied Economic Research (NCAER).
The NCAER Business Confidence Index (BCI) increased by about 80 per cent to 117.4 in Q2FY22 from 65 in the year-ago quarter, while it jumped nearly 90 per cent on a quarter-on-quarter basis. The index was also up 13.8 per cent over the pre-pandemic period of the second quarter of 2019-20, from 103.1.
The index was also higher for consumer durables, consumer non-durables, intermediate goods, capital goods and services industries. The BCI was the highest for consumer non-durables at 123.9 and the lowest for capital goods at 111.4. Services, battered by Covid-induced lockdowns for most of the first quarter, showed the BCI at 115.4.
The BCI is based on a business expectations survey conducted by the NCAER with a sample size of 500 firms of various sizes. The survey elicited responses from firms in six cities -- Delhi-NCR, Mumbai, Pune, Kolkata, Bengaluru, and Chennai.
Against the popular notion that micro, small and medium-sized enterprises (MSMEs) were not properly shaped even after the Covid-induced lockdowns were relaxed, all firms had a higher confidence index quarter-on-quarter, year-on-year, and compared with the pre-pandemic period, the report said.
"The current survey points to a recovery in business sentiments post the second wave of the pandemic. The recovery is broad-based across firm size, ownership, and industrial sectors," said Poonam Gupta, director-general, NCAER.
All regions, except the west, experienced an improvement in business sentiments. The BCI of the west fell by 9.5 per cent in Q2 compared with the first quarter. However, it was higher by 151 per cent from the year-ago period. Compared with the pre-pandemic period of the second quarter of 2019-20, the index was lower by 22 per cent.
Sentiments improved sequentially in Q2FY22 for production, domestic sales, exports, new orders, imports of raw materials, and pre-tax profits. Sentiments about costs, especially ones related to raw materials, remained elevated with two-thirds of the firms expecting the costs of raw materials per unit of output to go up in the next six months compared to the 54 per cent reporting so in the first quarter.
The Political Confidence Index (PCI), which measures the confidence of the firms about the Centre's management of key economic parameters, rose to 117.4 after staying below 100 since the fourth quarter of 2019-20.
However, the PCI for "managing inflation" was lower in the second quarter than the pre-pandemic level. This is probably due to the elevated sentiments regarding the cost of raw materials, said the NCAER report.
NCAER carried out its 118th Round of its Business Expectations Survey (BES) in September 2021. It has been carrying out the BES on a quarterly basis since 1991, covering 500 firms across four regions.
Copyright©2021 Living Media India Limited. For reprint rights: Syndications Today