The results of IMA’s Q1 FY18 Business Confidence and Performance Index (BCPI) Survey reflect a slowdown in growth in October - December 2016 (i.e., during the demonetisation period). Across our eight major sectoral groupings, business performance had taken a sharp downswing, compared to what firms had expected in the previous edition of the survey. However, things are looking better now, with a significant proportion of firms indicating stronger performance in January-March 2017, and a positive outlook for April-June.
Illustratively, in our sample of consumer goods firms, 53.8 per cent reported that their sales growth in October-December was lower than a quarter ago, compared to 9.4 per cent who had projected this (Chart 1). The corresponding figures for BFSI firms are 30 per cent and 3.7 per cent, and for manufacturing firms, 29.9 per cent and 8.2 per cent. Similarly, 38.5 per cent of infrastructure/telecom/ energy firms say sales growth was lower quarter-on-quarter in October-December (only 3.4 per cent has expected this) – for pharmaceuticals/ healthcare firms, the numbers are 36.4 per cent and 12.5 per cent, respectively (Chart 2). The January-March 2017 quarter saw a revival, with three-quarters of consumer goods companies indicating an acceleration in sales growth, and 61.5 per cent expecting the same in April-June. Similarly, four-fifths of BFSI firms said that their sales growth had picked-up in January-March, and half of the sample anticipates a further acceleration in April-June. Similarly, 41.7 per cent of the infrastructure/telecom/ energy sample enjoyed higher sales growth in January-March, and 58.3 per cent anticipate the same for the next quarter. Even among pharmaceuticals/ healthcare and services firms, the outlook is similarly bright. The ITeS sector is the only one to show a weakening of sales growth in January- March, though its expectations for April-June are better.
In terms of the second business performance parameter studied in the survey – new orders growth – there is a similar view. More BFSI, consumer goods, industrials, infrastructure/ telecom/energy, and pharmaceuticals/ healthcare firms saw lower sales growth in October-December, compared to those who had expected this (Charts 3 and 4). Performance subsequently improved in January-March and April-June, with a bulk of the firms reporting/anticipating a quicker pace of growth in new orders. (Again, the ITeS sector is an exception.) In terms of profitability growth (Charts 5 and 6) too, there is a significantly large set in sectors such as BFSI, consumer goods, and infrastructure/telecom/energy that report improvements in profitability in January-March and April-June. The readings are somewhat more subdued for net new (not replacement) hiring (Charts 7 and 8), with a large chunk, across sectors, indicating unchanged readings in January-March and April-June.