Business confidence down, cautions McKinsey

Indian executives along with the counterparts in other countries are markedly less confident about the economy's prospects than they were even three months ago. Companies are hiring less too.

According to a survey conducted by McKinsey, confidence fell 10 per cent overall during the last quarter""and even further in Europe and emerging markets.

The survey involved more than 7,800 executives""a fifth of them CEOs or other C-level executives, from 132 countries responded to a survey carried out by McKinsey on the level of confidence.

Executives in India are less confident than they were three months ago""in part. This McKinsey feel was because of rising projectionist sentiment in the United States and Europe.

Nevertheless, the same for executives in other developing economies fell almost 13 per cent. McKinsey also feels that in a tough global economy, countries including India face the possibility of not only lost exports but also rising oil prices, which would tend to hurt them more than others.

Executives in IT and telecommunications remain the most confident about the future, though they too are far less so than they were a year ago, since the two industries have continued to consolidate and face new sources of competition.

On the subject of hiring, executives are less bullish than they were a year ago: in May 2004, 43 per cent of the survey respondents said that they planned to increase the workforce over the following six months, while only 34 per cent say so this time around.

Meanwhile, 19 per cent now say they will decrease the workforce, though only 12 per cent had such plans in 2004.

"As for the subject of changes in the workforce, IT and telecom executives are the most volatile: both are more likely than others to say that they will increase it during the next six months as well as to say that they will decrease it," said McKinsey in the recent report.

"A year ago, only 13 per cent of telecom and IT executives were planning to shrink their workforce, a percentage lower than that of many other industries. Now, 24 per cent plans to do so, five percentage points more than the average. Such shifts may stem not only from the competitive intensity and general volatility of these two industries," the report ,mentioned.