Future Expectations Boosted by Election Optimism

The MNI India Business Indicator fell to 61.9 in April following an end-of-the-year rise to 65.5 in March, although sentiment was well above the same month a year earlier.

Expectations for the next three months hit a record high of 79.1 from 70.1 previously, on hopes that new governments will kick-start the economy after the national elections.

Asked specifically about how they think their company will perform after the election, just over half of respondents thought that business would be better. However, nearly 40% said they were uncertain, as an important concern was the stability of the government and its ability to push through reforms.

New Orders increased for the first time in three months and companies expected to reduce stock levels in the coming months as there was a general perception that demand will pick-up in the summer season.

The recent appreciation of the rupee leads to an increase in the proportion of companies reporting that the exchange rate was helpful for their business. For the first time since July 2013, panelists expected the exchange rate to benefit them in the next three months.

Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “Companies are very much in wait-and-see mode as they await the result of the elections. A majority of our panel of India’s largest companies, though, expect conditions to improve after the election.”

“While a win by business friendly candidate Modi is seen as the best outcome for Indian businesses, a result which delivers a stable and strong government is the main requirement to get the economy back on course.”