Business Optimism Index falls by 18.3% (q-o-q)

Highlights

·         Dun & Bradstreet Composite Business Optimism Index stands at 65.4 during Q1 2017, a decrease of 23.9%  as compared to Q1 2016

·         Optimism for volume of sales stands at 59% - a decrease of 19 percentage points as compared to Q1 2016

·         Optimism for new orders stands at 60% - a decrease of 14 percentage points as compared to Q1 2016

·         Optimism for net profits stands at 52% - a decrease of 17 percentage points as compared to Q1 2016.

Mumbai, January 09, 2017: The Dun & Bradstreet Composite Business Optimism Index stands at 65.4 during Q1 2017, a decrease of 23.9% as compared to Q1 2016. Based on the responses received, five out of the six optimism indices have registered a decline as compared to Q1 2016.

D&B's Composite Business Optimism Index:  Q2 2001 – Q1 2017

Note: BOI Index is for new base (2011)

“Business confidence for Q1 2017 plunged to a 31-quarter low as India Inc grapples with disrupted demand and production following the Government’s sudden decision to withdraw high-value old currency notes. While the move will bring long term benefits by reducing the size of the shadow economy and enhancing tax revenues, the immediate impact has been demand destruction due to severe cash crunch, heightened degree of uncertainty amongst businesses and dented confidence. The cash shortages in the economy have led to a reduction/deferral in purchase decisions with rural retail being impacted more compared to the urban segment. This has triggered a sharp fall in optimism with regard to net sales and net profits for Q1 2017. The optimism for new orders has also fallen to a 31-quarter low. Further, the low productivity in the winter session of Parliament and the uncertainty around the implementation date of GST are testing the confidence of business community”, said Kaushal Sampat, President & Managing Director, Dun & Bradstreet – India. “Going forward, the extent and speed with which the Government and the RBI re-monetise the economy would have a major influence on the way business sentiment shapes up. The measures that will be announced in the forthcoming Union Budget in the area of direct taxation and public investment along with the speed of transmission of lower interest rates will play a very important role in reviving confidence” he added.

Around 59% of the respondents expect volume of sales to increase in Q1 2017 compared to around 78% in Q1 2016, a decrease of 19 percentage points. While 19% expect it to remain unchanged, 22% expect the volume of sales to decline.

Around 52% of the respondents expect an increase in net profits in Q1 2017, compared to around 69% in Q1 2016, a decrease of 17 percentage points. Around 25% expect net profits to decrease, while 23% expect it to remain unchanged.

Around 56% of the respondents expect no change in the selling price of their products for Q1 2017. Around 25% of the respondents expect the selling price of their products to increase during Q1 2017, while around 19% expect a decline.

Around 60% of the respondents expect their order book position to improve in Q1 2017, compared to around 74% in Q1 2016. While 20% of the respondents expect new orders to remain unchanged, the remaining 20% anticipate new orders to decrease.

Around 27% of the respondents expect an increase in the size of their workforce employed during Q1 2017, as compared to 37% in Q1 2016. While 61% anticipate no change in the number of employees, the remaining 12% expect their workforce size to decline.

Around 28% of the respondents expect their inventory level to increase during Q1 2017, as compared to 18% in Q1 2016. While around 55% anticipate no change in inventory level, 17% expect inventory level to decline.

About the D&B Business Optimism Index

The D&B Business Optimism Index is widely recognised as an indicator, which measures the pulse of the business community and serves as a reliable benchmark for investors. The index is arrived at on the basis of a quarterly survey of business expectations.

The survey is conducted on a sample of companies that are selected randomly from D&B’s commercial credit file. The sample selected is a microcosmic representation of the country’s business community and includes companies from several sectors including basic goods, capital goods, intermediate goods, consumer durables, consumer non-durables and service sectors. All the respondents in the survey are asked six standard questions regarding their expectations as to whether the following critical parameters pertaining to their respective companies will register an increase, decline or show no change in the ensuing quarter as compared to the same quarter in the prior year: Volume of Sales, Net Profits, Selling Prices, New Orders, Inventories and Employees. The individual indices are then calculated by the percentage of respondents expecting an increase.

For calculating the Composite Business Optimism Index, each of the five parameters (excluding inventory) is assigned a weight. The positive responses for every parameter for the period under review are expressed as a proportion of positive responses in the base period (2011). The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.

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