Business confidence fell slightly in August, however itwas almost 7% above the level seen a year ago.
The MNI India Business Indicator eased to 68.4 in August from 70.0 in July, led mainly by construction and service sector companies. Manufacturing companies were more optimistic not least because they are a key focus area in the new government’s plan for turning the economy around.
Companies expected demand to pick-up in the upcoming festival season. Order Backlogs increased sharply to the highest since April and more companies expected inventories to fall over the coming months as the indicator for Inventories of Finished Goods declined by 8.8% to 50.0 in August.
While overall business conditions eased slightly, other key indicators in the report rose in August. Production, New Orders and Export Orders all strengthened between July and August.
The disinflationary trend seen in our price indicators over the past five months came to an end in August possibly due to the impact of delayed and below-par monsoons. Companies did not foresee any relief from inflation in the coming months either.
More companies reported better availability of credit, which was significantly above the level seen a year ago, possibly reflecting cuts in the statutory liquidityratio by the RBI.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “Sentiment among India’s largest companies has improved markedly over the past year and the small fall in August still leaves it at a historically high level. The real question, though, is whether some of this Modi driven boost to confidence translates through to production and new orders which have remained broadly stable over the same period.”