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Indicating signs of improvement, think-tank NCAER on Monday said its Business Confidence Index (BCI) rose 41.1 per cent in the July-September 2020 period.
This assumes significance as the GDP slipped by a historic 23.9 per cent in the April-June 2020 quarter, on account of the lockdown imposed by the government to check the spread of coronavirus.
"After declining for two consecutive quarters (Q4:2019-20 and Q1:2020-21) and falling to its lowest ever of 46.4 in Q1:2020-21 (Round 113), the NCAER Business Confidence Index (BCI) increased to 65.5 in Q2:2020-21 (Round 114), a quarter-on-quarter (q-o-q) increase of 41.1 per cent," the economic think-tank NCAER said in a release.
However, on a year-on-year (y-o-y) basis, BCI for the second quarter of 2020-21 was lower by 36.5 per cent compared with a year ago and remained lower than the BCI in the fourth quarter of 2019-20.
"Round 114 of the NCAER BES, therefore, suggests that although business sentiment is recovering from its lowest-ever level in Q1:2020-21, it continues to remain subdued," it said.
The 114th round of the NCAER Business Expectations Survey (BES) in September 2020 came as the country entered the fourth phase of unlocking of the economy.
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The BCI is an indicator of business sentiment across the Indian industry.
It is driven by four components -- overall economic conditions will improve in the next six months; financial position of firms will improve in the next six months; present investment climate is positive as compared to six months ago; and the current capacity utilisation is close to or above the optimal level.
"The change in the percentage share of positive responses on a q-o-q basis tells us how sentiments have changed," the National Council of Applied Economic Research (NCAER) said.
The BCI in the second quarter increased on a q-o-q basis by 38.6 per cent for consumer durables, 43.8 per cent for consumer non-durables, 89.3 per cent for intermediate goods, 36 per cent for capital goods, and 32.3 per cent for the services sector, it added.
NCAER further said the index for the western region (Mumbai and Pune) increased by 135.5 per cent and the southern (Bengaluru and Chennai) by 79.6 per cent on a q-o-q basis.
The BCI for the northern (Delhi-NCR) remained virtually unchanged between first and second quarter of 2020-21.
"However, the BCI for the eastern (represented by Kolkata) contracted further by 6.1 per cent," the think-tank said.
He added that business sentiment in the eastern region continues to be persistently weak, unlike the other regions.
Overall, business sentiment was more optimistic in the northern and southern regions compared to the eastern and western, it said.
The BCI increased on a q-o-q basis by 195.3 per cent for the public sector, by 12.7 per cent for private limited firms, by 54.1 per cent for public limited firms, and by 53.7 per cent for partnerships/individually owned firms.
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