India’s slowing economic growth, water shortage and regulatory hurdles have taken its business sentiment in June to the lowest level since 2016, a survey by market research firm IHS Markit showed on Monday.
The aggregate of private-sector companies forecasting output growth during this year fell to +15% in June from +18% in February. The level was earlier hit three years ago – its lowest since data became available in 2009, according to the report.
Hopes of pro-business government policies and a better financial flow continue to underpin optimism towards output and profitability growth in the year ahead, said Principal Economist Pollyanna De Lima said.
“As such, firms plan to expand capacities by taking on additional workers, though sentiment for all measures of expenditure are anaemic.”
Capital investment confidence in India is among the weakest of all countries for which comparable data are available, ahead of only China and the UK, while optimism regarding research and development is below the average for emerging markets, she said.
India expects its economy to grow 7% this year, after growth slowed to a five year-low of 6.8% in the last fiscal year, as New Delhicautioned of challenges in keeping fiscal deficit in check earlier this month.
The country is also staring at a deficit monsoon this year, raising concerns over the output of summer-sown crops in a nation where 55% of arable land is rain-fed.
The survey also found companies were concerned about potential depreciation in the rupee pushing prices for imported materials higher, a lack of skilled labour, likely tax hikes, financial difficulties and customers increasingly demanding discounts.
The IHS Markit reports are produced on a triannual basis, with data collected in February, June and October.
A similar survey report last month by Thomson Reuters/INSEAD showed confidence among broader Asian companies was also at a 10-year low and showed little signs of easing.