Confidence among India’s small businesses remains high with an overwhelming majority of the SME executives expecting improvement in the second quarter of 2022 on most of the parameters including sales, capacity utilisation and hiring, according to an industry survey report released.
As per ASSOCHAM-Dun & Bradstreet Small Business Confidence Index (SBCI), small businesses expect a strong revival in export demands.
The index, which measures the level of optimism of small and medium businesses on key business parameters such as sales, employment, prices, inventory and investment, stood at 87 in the second quarter of 2022.
An index value above 50 signals an improvement or increase in the forthcoming quarter compared to the same quarter in the previous year. All indicators suggest a likely expansion in economic growth during Q2 2022.
“As is clear from the latest IMF World Economic Outlook, the Indian economy is projected to be the fastest-growing amongst the leading economies of the world. Our survey amongst the SMEs’ executives clearly points towards significant contributions from the small businesses” said ASSOCHAM Secretary General Deepak Sood.
“An important highlight of our survey is that the small businesses have gathered enough confidence to add to their workforce,” he said.
One of the primary findings of the ASSOCHAM-D&B SBCI survey is that export demand is projected to increase. The percentage of the SMEs expecting an increase in their net sales and new export orders stood at 77 and 86, respectively, suggesting export-led demand growth in Q2 2022.
On the other hand, 75 per cent of SMEs expect an increase in their domestic orders, the survey report said.
The high level of optimism on export orders could be a result of the Comprehensive Economic Partnership Agreement that India signed with the United Arab Emirates and the Economic Cooperation and Trade Agreement with Australia, as well as the prospects of similar agreements with the UK and Canada in 2022 and 2023, said Avinash Gupta, Managing Director, Dun & Bradstreet India.
These agreements are expected to boost India’s export of agricultural products, footwear, gem & jewellery, leather, and textiles. Supply chain disruptions caused by the Russia-Ukraine crisis has improved India’s export prospects of iron ore, iron & steel products, and wheat, he said.
In addition, businesses are increasingly looking for alternate suppliers to de-risk their operations since the outbreak of COVID-19. Cost competitiveness makes India an attractive destination for sourcing. These factors will lend to India’s export momentum in Q2 2022, Gupta added.
On improved prospects for sales, businesses see an increase in their average capacity utilisation rate to 63 per cent in Q2 2022, up from 57 per cent in Q1 2022. An overwhelming 77 per cent of SMEs expect an increase in their new fixed capital investment, which is indicative of optimism for future demand.
As many as 76 per cent of SMEs expect an increase in their workforce, even as they have to deal with the price pressure. 80 per cent of the SMEs expect raw material prices to increase, whereas 75 per cent see an upward revision in their selling prices.