Business optimism in India fades after festive season, as growth concerns accentuate

The Dun & Bradstreet India Business Optimism Index declined by 14% (y-o-y) and 6.9% (q-o-q) in Q1 2023

Mumbai, January 19^th, 2023: The Dun & Bradstreet India Composite Business Optimism Index stands at 77.3 for Q1 2023, a fall of 14% compared to Q1 2022. Four out of six optimism indices have registered a decline compared to Q1 2022. The Dun & Bradstreet Composite Business Optimism Index, which has been measuring the changing business sentiment of India Inc. since 2002, is a leading indicator for India’s overall growth, with a correlation co-efficient of around 80% with the Gross Domestic Product (GDP).

Highlights

• Optimism for selling price stands at 35% in Q1 2023, the lowest since Q3 2021
• Optimism for volume of sales stands at 66% in Q1 2023, the lowest since Q3 2021
• Optimism for net profits stands at 50% in Q1 2023, a decrease of 12 percentage points from Q1 2022 and 5 percentage points from the previous quarter
• Optimism for new orders stands at 61% in Q1 2023 compared to 69% in Q1 2022
• Optimism for inventory levels stands at 40% in Q1 2023, the largest fall amongst the six parameters compared to the previous quarter
• Optimism for hiring employees stands at 49%, the same as Q1 2022
• The intermediate goods sector is the least optimistic across all parameters

Dun & Bradstreet's Composite Business Optimism Index:  Q1 2003 – Q1 2023

Note: BOI Index is for new base (2011)

Arun Singh, Global Chief Economist, Dun & Bradstreet said, “Our survey revealed that the optimism level of businesses has decreased for Q1 2023 after the festive season. Amidst the threat of arecession or an entrenched slowdown globally, the optimism amongst business fell not only from the previous quarter but also from the previous year. Deterioration in some macro parameters such as the widening of the current account deficit, volatile foreign investment inflows, the depreciating rupee and imported inflationary pressures, had a bearing on the sentiment of businesses. As global monetary tightening is expected to continue in most economies due to weak evidence of inflation reduction globally, spillover effects will continue to pose headwinds to businesses in the near future. Our survey highlights that the optimism for both volume of sales and selling price in Q1 2023 are the lowest since Q3 2021, indicating businesses are apprehensive about the slowing of domestic demand. Passing on the increase in input prices to the customers would be difficult. In the forthcoming quarter, while the announcements in the Union Budget for 2023-24 are likely to shape the sentiment for businesses, concerns for growth and export performance will continue to impact business sentiment.”

Key findings from the Q1 2023 survey

66% of the respondents expect volume of sales to increase in Q1 2023 compared to 73% in Q1 2022, a decrease of 7 percentage points. While 24% expect it to remain unchanged, 10% expect the volume of sales to decline.

50% of the respondents expect an increase in net profits in Q1 2023 compared to 62% in Q1 2022, a decrease of 12 percentage points. 35% expect net profits to remain unchanged, while 15% expect it to decrease.

35% of the respondents expect the selling price of their products to increase during Q1 2023, registering a decline of 12 percentage points compared to Q1 2022. 52% of the respondents expect no change while 12% expect a decline in the selling price of their products in Q1 2023.

61% of the respondents expect their order book position to improve in Q1 2023, compared to 69% in Q1 2022, a decrease of 8 percentage points. While 28% of the respondents expect new orders to remain unchanged, 11% anticipate new orders to decrease.

40% of the respondents expect their inventory level to increase during Q1 2023, compared to 37% in Q1 2023, an increase of three percentage point. While 40% anticipate no change in inventory level, 20% expect inventory level to decline.

49% of the respondents expect an increase in the size of their workforce employed during Q1 2023, remaining unchanged compared to Q1 2022. While 42% anticipate no change in the number of employees, 9% expect their workforce size to decline.