By Ritika Chauhan
The worlds leading mid-market business survey, conducted by Grant Thorton, has ranked India at the seventh position in the Business Optimism Index. To put it into perspective, India has slipped from the second position to its current position, evidencing a lag in the economy.
Business optimism
The Grant Thorton International Business Report (IPR) is considered among the most accurate and relied-upon reports on listed and private businesses across the world. More than 36 economies are surveyed on an annual basis by way of questionnaires. These questionnaires are addressed to more than 10,000 executives across these economies, in their local language. Additional country-specific questions are also asked, along with some other relevant fieldwork over the telephone. As far as Business Optimism Index is concerned, parameters such as confidence of revenue expenditure, confidence in profitability, exports, along with the expectations of the increase in selling prices are considered. Business optimism is now being recognised as an important psychological factor contributing to business performance. A business may have the potential to succeed but it may not realise this potential if it is not optimistic or confident.
As per the results revealed on 8th November, Indonesia is at the top of the index, followed by Finland, the Netherlands, Philippines, Austria and Nigeria, in that order.
Reason’s for India’s decline
The slippage in Indias rank can be attributed to various reasons. One of the major reasons is that the companies are not confident about high revenue growth over the next 12 months. 46% of the companies have also expressed a lack of confidence in profitability over the next few months. Harish H V, a member from Gordon Thorton India, has commented that clear signs of a struggle are visible in the Indian economy, such as low expectations of exports in the future.
This lack of confidence among Indian businesses is being blamed on growth constraints such as the lack of ICT infrastructure (voted by 49% businesses), regulations, and red tape (voted by 69% businesses). Other constraints include a shortage of finance and lack of skilled personnel.
Effects on the government
How such index affects our government is that it induces the government to enact favourable reforms that make the environment conducive for carrying out business. The government is stimulated to look into growth constraints and minimise them, such that it increases the confidence of business firms.
The areas where Indian businesses have found to be optimistic include increase in employment, investment in plants and machinery, as well as research and development. It is also believed that government actions and reforms, especially those that facilitate the ease of doing business in India, should aid India in recovering from this decline in the ranks.
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