Hype over? Business confidence in India falls to pre-Modi levels, says Deutsche Borse

Sentiment towards the country's current business environment and expectations for future have dipped to pre-Modi government levels, a Deutsche Borse survey today said.

The MNI India Business Sentiment Indicator, a gauge of the current sentiment among BSE listed companies, fell 2.5 percent to 62.3 in May, from 63.9 in April.

"The May report confirms that the trend in business activity is down, with overall sentiment, output and orders all continuing to fall from the Q4 peak," Chief Economist of MNI Indicators Philip Uglow said.

This is the lowest level for the index since April 2014, which coupled with decline in output and orders point to a reduction in business activity.

 Hype over? Business confidence in India falls to pre-Modi levels, says Deutsche Borse


"Production declined to a near 2-year low in May and evidence from the survey suggested that Narendra Modi's ambitious 'Make in India' project is failing to get off the ground," the report said.

Companies, according to the report, saw a significant weakening in both domestic and export orders. The index for new orders fell sharply to 57.1 in May 2015, the lowest since May 2013, while export orders shrank to 53.6, the weakest since June 2013.

On inflation, it said, weak demand and competition have capped prices.

"Along with the continued soft official data on production and exports and the low level of inflation, we expect RBI to cut rates further at the June 2 monetary meeting," Uglow added.

The survey said the overall sentiment reacted positively to the two rate cuts this year by RBI although their impact remains limited. The central bank has lowered its policy rate twice so far in 2015, but maintained a status quo in its last policy review on April 7 on fears of unseasonal rains impacting food prices.

The next review meet is scheduled on June 2, although the previous two cuts took place outside the policy cycle. MNI Indicators, part of the Deutsche Borse Group, offers macro-economic data and insights into businesses and investment community.


Updated Date: May 28, 2015 07:59:24 IST