The MNI India Business Indicator, calculated from the responses of more than 400 BSE listed companies, declined by 1.1% to 68.9 in November from 69.7 in October, with demand falling as the festival season came to a close.
Business confidence eased for the second consecutive month to the lowest since August, although it was 6.7% above the level seen a year ago, signifying that sentiment remains buoyant. In November, business confidence eased across all sectors with service sector companies leading the modest fall in sentiment.
In answer to a special question, 39% of respondents thought that the policies of Modi's government have had a positive impact on their business. A significant proportion highlighted the quicker implementation and clearance of business proposals by the government as the primary reason for the improvement. Nevertheless, 45.6% of our panel reported that their business had been unaffected by the government's policies, while just under 2% thought that they have had a negative impact.
In line with the easing in overall business confidence this month, there was a decline in some of the key indicators within the report. New Orders and Order Backlogs fell following the end of the festival season. On a positive note, a growing number of companies reported lower input costs while a fifth of our panel responded that there was greater availability of credit.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, "Business sentiment fell a little in November but remains at a relatively high level. While Indian businesses generally have a positive outlook, we've yet to see a significant pick up in output or orders. We need to see a clear recovery here before we can say that the recovery is entrenched."
"The global drop in oil prices has come at a good time for India and will help to boost growth as well as cap inflation. Monetary policy looks set to remain on hold over the short-term but a slightly lower profile for inflation over 2015 should enable the RBI to reduce official interest rates before the second half of next year."
