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Business confidence dips to lowest in six years

The survey by think tank NCAER showed that the Business Confidence Index fell 15.3% from the preceding quarter

The numbers suggest a deep and all-pervasive worsening of business sentiments NCAER said in a statement

New Delhi: Business confidence of India Inc declined to its lowest in six years in August-October according to the latest survey released by Delhi-based think tank National Council of Applied Economic Research (NCAER) on Monday.

According to the quarterly survey the Business Confidence Index (BCI) dipped to 103.1 falling 15.3% from the quarter ended July. The BCI was at 100.4 in October 2013.

“The numbers suggest a deep and all-pervasive worsening of business sentiments” NCAER said in a statement.

Indian businesses have been battling demand slowdown and liquidity crunch which resulted in economic growth rate cooling to a six-year-low of 5% in the June quarter while private consumption expenditure was at an 18-quarter-low of 3.1%.

The International Monetary Fund last month cut its growth forecast for India to 6.1% from 7% earlier for 2019-20 citing corporate and environmental regulatory uncertainty together with concerns about the health of the non-bank financial sector that has weighed on consumption demand.

 

On Friday rating agency Moody’s Investors Service cut India’s sovereign outlook to negative from stable citing lack of intent for reforms in India and a prolonged economic slowdown. It maintained a second lowest investment grade rating for India.

The BCI survey asks four questions with equal weight to the answers such as the overall economic conditions will be better in the next six months the financial position of firms will improve in the next six months the present investment climate is positive and the present capacity utilisation is close to or above optimal.

The fall in the BCI in October 2019 was driven by deterioration in sentiment across all four components NCAER said.

The steepest decline was for the component “the overall economic conditions will improve in the next six months” where the share of positive responses fell to 46.3% in October from 58.9% in July.

The percentage of respondents expecting “the financial position of firms will improve in the next six months” decreased to 39.3% in October 2019 from 48.8% in July.

The muted business sentiment was further reinforced as 32.5% of the respondents in October believed that “the present investment climate is positive compared with six months ago” while the component of ‘present capacity utilisation is close to or above optimal level’ dropped by 86.2% to an all-time low since July 2009.

Firms with annual turnover of less than ₹1 crore or micro firms was the only group that showed a slight upswing of 2% in BCI over the previous quarter.

Interestingly this was the only group that had shown a decline in BCI between April and July. Firms with annual turnovers of ₹10-100 crores registered the maximum fall of 20.6% in BCI followed by ₹100-500 crores and ₹1-10 crores firm groups with 17.6% and 14% respectively.

“Business sentiment regarding production domestic sales exports imports of raw materials and pre-tax profits remained subdued in October over July 2019 among all firm groups across industry type in line with the overall trends. The labour market outlook for the next six months continued to remain muted” NCAER said.

The other related survey of Political Confidence Index (PCI) released by NCAER fell 35.6% to its lowest since July 2013 after two consecutive increases. The number of positive responses on all the components assessed in this index fell between the two quarters of July and October 2019.

The eight components comprising PCI are “managing overall economic growth” “managing exchange rate” “pushing the economic reforms forward” “managing government finance” “managing conducive political climate” “external trade negotiations” “managing unemployment” and “managing inflation”.

Published in: Live Mint November 13 2019

Business confidence fell 15% across industry in Sep quarter: NCAER survey

Business confidence across the industry declined in the September quarter over the previous three months due to an all-pervasive worsening of business sentiment said a survey by economic think tank NCAER on Monday.

NCAER’s Business Confidence Index (BCI) an indicator of business sentiment across Indian industry stood at 103.1 in the second quarter of 2019-20 falling 15.3 per cent quarter-on-quarter despite a small reprieve in July 2019.

As compared to the year-ago period the BCI fell 22.5 per cent during the the second quarter.

This is based on the 110th Round of the Business Expectations Survey (BES) carried out by NCAER said the National Council of Applied Economic Research.

“The numbers suggest a deep and all-pervasive worsening of business sentiments” it said.

The survey focussed on four components which have equal weightage in the BCI.

The steepest decline was for the component ‘the overall economic conditions will improve in next six months’ where the share of positive responses fell from 58.9 per cent in June 2019 quarter to 46.3 per cent in September 2019 quarter.

“The percentage of respondents expecting that ‘the financial position of firms will improve in the next six months’ decreased from 48.8 per cent in June 2019 to 39.3 per cent in September 2019” the think tank said.

The muted business sentiment was further reinforced by the barely 32.5 per cent of the respondents who believed that ‘the present investment climate is positive compared with six months ago’.

The component of present capacity utilisation is close to or above optimal level’ dropped 86.2 per cent to an all-time low since July 2009.

All five sectors covered by NCAER’s BES — consumer non-durables consumer durables intermediate goods capital goods and services — showed a deterioration of business sentiment.

The BCI of each of the sectors registered double-digit decline of 11.4 per cent 11.4 per cent 21.4 per cent 18.3 per cent and 13.1 per cent respectively in September quarter as against the previous three months.

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Budget subsidies have been defined as the unrecovered cost of economic and social services. The incidence of these implicit and explicit budget subsidies provided by the central and state governments has declined from about 12.9 % of GDP in 1987-88 to 10.3 % at present. The bulk of these subsidies is provided by the states and about half is spent on non-merit subsidies. The paper finds an inverse relationship between subsidy incidence and per capita income and also finds that subsidies are important determinant of the consumption of many public services though not all. There are large variations across states in the efficiency of subsidy use and the paper identifies the states which lie on the subsidy efficiency frontier for several key public services. The paper also argues that rationalisng non-merit subsidies is one of several deep fiscal reform measures that could together free up massive fiscal space, conservatively estimated at 6% of GDP, and outlines a proposal for using this fiscal space to finance an inclusive growth revival strategy that could simultaneously reduce the fiscal deficit even without raising any tax rates.

Growth and Structural Transformation of Agriculture in Bihar

The economy of Bihar is dominated by agriculture, which contributes over a quarter of the state’s income and accounts for employment of about 70 per cent of the rural workforce. Hence, robust growth of the agriculture sector holds the key to the economic and social development of the state. Keeping this in view, the Government of Bihar has launched many initiatives for improving productivity growth in the crop and livestock sectors. These include the development of irrigation, strengthening the input supply and extension programmes, and introduction of market reforms and farm mechanisation, among others. These initiatives are being implemented under different phases of the agriculture roadmaps, laid down by the Government of Bihar. These roadmaps focus on the holistic development of agriculture with an emphasis on increasing productivity growth and improving farmers’ income.

 

In this context, this policy brief attempts to identify the sources of Crop Output Growth in Bihar in the last decade and a half. This is must to identify the scope for Policy Interventions.

Sources of Crop Output Growth in Bihar: Implications for Policy Interventions

Bihar has a geographical area of 9.4 million hectares and fertile agricultural land spread across the Indo-Gangetic plains. The net cultivated area in the state accounted for about 57 per cent of the total reported geographical area during 2012-14. Over 70 per cent of rural workers depend on agriculture for livelihood. Despite its importance for the economic growth of the state, the agricultural sector had for long remained neglected, needing a big policy push for unleashing its growth potential. In order to address this shortcoming, the Government of Bihar launched agriculture roadmaps with specific targets for output, distribution of inputs, and service delivery, to be achieved within a specified time frame. In this context, this policy brief has been prepared for assessing whether input intensification or technological change is driving growth in crop output.

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