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Businesses and consumers, reeling under high inflation and a slowdown, do not seem to share the government’s optimism on economic revival in the second half of 2013-14.
Business sentiment and consumer confidence continued to deteriorate in the second quarter and the outlook remained grim, according to a Reserve Bank of India report.
The central bank’s Industrial Outlook Survey reflected weak business sentiment, and said further moderation was expected. The survey (in August-September) showed the Business Expectation Index (BEI) dropped significantly for the second quarter of 2013-14, falling below the threshold level of 100, separating contraction from expansion, and touching the lowest since the first quarter of 2009-10.
For October-December (Q3), expectations remained well above the threshold level, RBI said in its Macroeconomic and Monetary Developments report, a day ahead of the second quarter monetary policy review.
While the sentiment on production remained broadly unchanged, those on order books, capacity utilisation, exports and imports dropped substantially for Q2. The outlook for Q3 showed similar sentiment.
The perception on the overall financial situation dropped substantially for Q3. The cost of external finance is perceived to rise and the percentage of respondents expecting this has risen for the first time since Q4 of 2011-12.
The cost of raw material, as well as selling prices, are expected to increase in Q3. The perception on profit margins continued to remain in negative terrain and was expected to deteriorate further in Q3, RBI said.
Consumers, under a long spell of inflation, are not very hopeful of an improvement. The Reserve Bank’s Consumer Confidence Survey (conducted in September) showed a decline in consumer confidence, as indicated by the Current Situation Index and Future Expectations Index. There was a decrease in the positive perceptions of household circumstances, income, spending and employment, the report added.
