India’s June Business Sentiment Falls To Its Lowest Level In Three Years
According to the IHS Markit survey, water shortages, public policies and weak sales restricted business sentiment in India in June. (Photographer: Dhiraj Singh/Bloomberg)

India’s June Business Sentiment Falls To Its Lowest Level In Three Years

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Business sentiment in India fell to its lowest level since June 2016 as companies were worried about a slowing Indian economy, the government's economic reforms policy and water shortage, an IHS Markit survey said Monday.

According to the IHS Markit India Business Outlook, predictions of softer activity growth underpin the downward revisions of profit outlook, subdued hiring plans and relatively muted capital expenditure.

The net balance of private sector companies foreseeing output growth in the year ahead fell from 18 percent in February to 15 percent in June—this matches the data of June 2016, and also October 2009 when aggregate figures became available.

"June sees business sentiment in India fall to the joint lowest level since comparable data became available in 2009," the IHS Markit survey said.

According to the survey, water shortages, public policies and weak sales restricted business sentiment in June. Companies are also concerned about potential rupee depreciation pushing prices for imported materials upwards, lack of skilled labour, likely tax hikes, financial difficulties and customers increasingly demanding discounts.

"As seen across emerging markets, business sentiment in India is down in June, dampened by worries about the sustainability of the economic upturn, water shortages, public policies and regulation," said IHS Markit Principal Economist Pollyanna De Lima.

However, hopes of pro-business government policies and a better financial flow continue to underpin optimism towards output and profitability growth in the year ahead.

On the employment front, amid predictions of a pick-up in demand, companies plan to expand capacity by hiring additional workers.

"As such, firms plan to expand capacities by taking on additional workers, though sentiment for all measures of expenditure are anaemic," Lima said.

The Global Business Outlook Survey for worldwide manufacturing and services is produced by IHS Markit and is based on a survey of around 12,000 manufacturers and service providers that are asked to give their thoughts on future business conditions.

The report is produced on a tri-annual basis, with data collected in February, June and October. The latest survey was conducted between June 12 and 26.

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