Business sentiments recover, weak demand continues: CII Survey

With the gradual lifting of the restrictions on economic activities across the country, business sentiments have recovered with the CII Business Confidence Index surging to 50.3 in the July-September period.

During the April-June quarter of 2020, it recorded its lowest reading at 41.0.

“The stellar recovery in the index has been supported by the remarkable increase in the Expectations Index (EI), which rose 46 per cent quarter-on-quarter, to the level of 55.2, as the nationwide lockdown restrictions were lifted, and businesses gradually began to reopen during the July-September quarter,” a CII statement said.

The ‘Current Situation Index’, on the other hand, was recorded below the psychological level of 50 — at 40.6 — as the stringent lockdown restrictions led to the complete shutdown of most business operations for a larger part of the quarter, thus impacting business sentiments.

Commenting on the survey results, Chandrajit Banerjee, Director General, CII, said: “It is heartening to note the recovery in CII’s Business Confidence Index for the July-September quarter, indicating an improvement in business conditions during the period. However, while a recovery is underway, it could be tremendously expedited through continued government support and hand-holding of businesses during this crisis.”

Although business sentiments have strengthened, the demand scenario continues to remain weak, as per the survey.

“More than half of the respondents (51 per cent) have indicated that the weakness in domestic demand is likely to be the top-most risk to business confidence in the next six months,” it said.

Further, nearly 30 per cent of the respondents feel that the business activity may return to the pre-pandemic levels by Q1 FY22.

The heightened uncertainty led by the recurrent lockdown in certain states is impacting business operations and lengthening the recovery timeline even though a majority of the workforce has already returned to the workplaces for around 42 per cent of the respondents.

The CII statement noted that a large share of respondents — around 37 per cent — foresee a return of capital spending to its pre-pandemic levels only by the first half of FY22.

The survey was conducted during August-September 2020 and saw the participation of more than 150 firms across all industry sectors, including micro, small, medium and large enterprises, from different regions.