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Business sentiments in western India in the first quarter of the current financial year remained relatively unaffected by the second Covid wave in comparison to other regions of the country, a National Council for Applied Economic Research (NCAER) business confidence index has revealed. One of the key elements on which the economy can ride out into the growth path is business confidence and the NCAER business confidence index dipped by as much as 27.5% in the April-June quarter of FY22 compared to the January-March quarter of FY21, the second Covid wave being the chief wrecker.
The worst-hit sentiments were observed in the East that suffered a 61.6% dip in the index.
The decline of the index in the north was 10.8% and 50.6% in the south.
According to reports this is the second lowest pan-India dip of the index. The lowest was the levels recorded in April-June quarter of FY21, when the pandemic and the resultant lockdown caught the entire country by surprise.
NCAER has been conducting these surveys since 1991, the year when economic reforms were unleashed in the country. It conducts the survey among 500 firms across the country.
“High-frequency indicators suggest that though economic activity moderated in 2021-22: Q1 as compared to 2020-21: Q4, yet it still outperformed in 2020-21: Q1. It is not surprising that business sentiments worsened in the first quarter of the current fiscal. This worsening was fairly broad-based,” it said.
Services worst-hit
According to reports, the index dipped a sharp 35.3% for the services sector which is obviously the worst-hit. It declined by a close 32.9% in the consumer durables sector where the expenditure is mostly deemed as inessential.
Other sectors to suffer a hit were capital goods (32.3%), intermediate goods (17%) and consumer non-durables (14.3%).
In the fourth week of June while releasing the quarterly review of the economy, NCAER had said that high-frequency indicators showed a sharp decline in economic activity during April and May 2021, the peak of the second COVID-19 wave.
EPFO data corroborate
One significant observation by NCAER was that business sentiment in Q1 of FY21 improved in the west in comparison to the other regions of the country.
Significantly, this observation got strong support from the recently-published Employees Provident Fund Organisation data. In this data it was revealed that more than one-fifth of all the employments created in all age groups were accounted for by the state of Maharashtra in the month of May, the worst month of the second wave. The neighbouring state of Gujarat also accounted for a sizeable chunk – 10.09%.
Incidentally, Maharashtra was the worst-hit state in the second wave.
Between them, these two states created 31.89% or close to one-third of all the jobs created in the month of May, the worst month of the second wave.
Parameters
The survey that is as old as India’s liberalised economy rests of four basic parameters. These are: present capacity utilisation is close to above the optimal level, present investment climate is positive as compared to six months ago, financial position of the firm will improve in the next six months and overall economic condition will improve in the next six months.
According to reports, sentiments declined in Q1 FY22 compared to Q4 FY21 on parameters such as managing overall economic growth, managing a conducive political climate, managing employment, managing inflation and trade negotiations.