Increased revenue, greater employment opportunities and higher profitability are three key factors which have bolstered the optimism of Indian businesses going into the new year.
The International Business Report (IBR) put out by global consulting firm Grant Thornton shows that India has seen a smart 13 percent increase in optimism compared to the previous year.
The IBR is a survey of 3,200 business leaders in 44 economies. The global results, however, are in sharp contrast to that of India with global business leaders displaying uncertainty caused by concerns of the US “fiscal cliff” and ongoing fears over the long-term viability of the eurozone.
The IBR, significantly, shows that global business optimism stands at just net 4 percent heading into 2013. This halts a rally in confidence seen in the first half of 2012, when global business optimism reached 23 percent, and brings it nearer to the 0 percent level observed this time last year.
Optimism among Indian business owners, on the other hand, remains well ahead of the global average in terms of optimism with a balance of 71 percent compared to 4 percent globally. Increased revenue is the key indicator for increased optimism (85 percent) among Indian businesses followed by employment opportunities (84 percent) and profitability (71 percent), Grant Thornton said.
Clearly, several other factors, including policy pronouncements and the hope of a lowering of interest rates in the near future, also played their part in making Indian business leaders optimistic.
Munesh Khanna, Partner, Grant Thornton in India said, “The global economic scenario and certain inherent domestic risks notwithstanding, the Indian economy, on the back of positive measures such as policy changes, mega project clearances, regulation implementation and anticipated interest rate reduction is poised to grow at an accelerated growth trajectory. This is reflected in the increased optimism levels among Indian businesses.”
Optimism most volatile in mature markets
Regionally, the IBR reveals a more mixed picture. Business optimism in the emerging markets of Latin America remained relatively stable over the last year, and actually increased to 69 percent in Q4, up from 61 percent this time last year. The BRIC economies (34 percent to 39 percent) also remained consistently optimistic, while Asia Pacific (excluding Japan ) has seen a rise from 23 percent to 28 percent over the same period.
By comparison, optimism in North America swung from 6 percent in Q4 2011 to 52 percent in Q2 2012, before falling back to just 1 percent in Q4 2012. The G7 economies have seen similar swings, while European businesses have reported a slow decline in business optimism, the consulting firm said.
Ed Nusbaum, CEO of Grant Thornton International, said: “The upswing in mature economy business optimism we saw in the first half of 2012 followed pronouncements by the ECB and the Federal Reserve on the level of support they were prepared to provide their respective economies. However, this confidence has dissipated over the second half of the year. By contrast, emerging economies have remained far less volatile. It’s a fascinating trend which drives home where the major problems in the global economy lie at present.”