Input Prices Decline to Lowest on Record
The MNI India Business Sentiment Indicator rose 3.1 per cent to 66.2 in February from 64.2 in January as the cheaper cost of raw materials helped to offset the recent weakening in demand.
The increase in confidence brought to a halt four monthly declines in the business indicator, leaving it close to the average seen over the past year, said MNI India which does a monthly poll of Indian business executives at companies listed on BSE.
Confidence was boosted in the run up to the election of Prime Minister Narendra Modi last year but has subsequently eased as businesses have become increasingly disappointed with a lack of concrete reforms.
While overall sentiment is almost 14 per cent above the level in February 2014, this performance has not been matched by other key indicators in the report such as New Orders and Production which have both fallen.
Companies benefited from lower prices and the recent strengthening in the rupee. The Input Prices Indicator fell to just above the 50 breakeven mark, the lowest in the survey’s history.
The business community also reported that the interest rate costs they faced were falling at the fastest pace on record following the recent cut in official rates.
Other activity metrics in the survey showed a moderate weakening. Companies were less willing to hire in February as they scaled back production in the face of weaker demand. Production fell to the lowest since May 2014 and New Orders declined to the lowest since October 2013.
Commenting on the latest survey, Chief Economist of MNI Indicators, Philip Uglow, said: “The recent rate cut likely helped to boost overall sentiment a little, helped by a lower inflation environment which has cut input costs for companies. Other key activity metrics such as production and orders, though, are still trending down.
“The continued low level of inflation seen in our survey and also the official data suggests the Reserve Bank of India has room to ease policy further, although critical to timing will be the Reserve Bank of India’s assessment of the recent Gross Domestic Product revisions.”
MNI Indicators is part of Deutsche Börse Group and offers unique macro-economic data and insight to businesses and the investment community.
