Dun & Bradstreet’s India Business Optimism Index Declined by 5% on a QoQ Basis, but Increased by 12.5% on a YoY Basis

The Dun & Bradstreet Composite Business Optimism Index stands at 89.9 for Q1 2022, a decline of around 5.0% compared to the Q4 2021 survey. Four out of six optimism indices have registered a decline as compared to Q4 2021. The Business Optimism Index, which has been measuring the changing business sentiment of India Inc. since 2002, is a leading indicator for India’s overall growth with a correlation co-efficient of 80% with the Gross Domestic Product (GDP).

Key Highlights

• Around 73% of the respondents expect volume of sales to increase in Q1 2022 compared to 79% in Q4 2021, a decrease of 6 percentage points
• 62% of the respondents expect an increase in net profits in Q1 2022, same as in Q4 2021
• 48% of the respondents expect no change in the selling price of their products in Q1 2022
• 69% of the respondents expect their order book position to improve in Q1 2022, compared to 79% in Q4 2021, a decrease of 10 percentage points
• 37% of the respondents expect their inventory level to increase during Q1 2022, compared to 38% in Q4 2021, a decrease of 1 percentage point
• 49% of the respondents expect an increase in the size of their workforce employed during Q1 2022, the same as in Q4 2021

Commentary from Global Chief Economist at Dun & Bradstreet, Dr. Arun Singh, “The survey for Dun & Bradstreet Business Optimism Index was conducted in December 2021, when the Omicron variant was spreading faster, forcing countries to introduce mobility restrictions. The Index shows that optimism level of India Inc. dropped in Q1 2022 after surging to an almost eight-year high in Q4 2021. Concerns that the new variant would restrain the revival in demand and slow down the recovery would have weighed upon the sentiment of businesses."

On a positive note, the optimism level was higher by 12.5% compared to the same quarter last year. Nonetheless, the point of concern, as well as the focus, for the government and the Reserve Bank India (RBI) should be small businesses. "There is a need to continue to extend the support measures, as our survey found that small businesses were the least optimistic across all the parameters, except for selling price, reflecting the difficult operating environment and market conditions under which they are working. Looking ahead we expect that the high vaccination rate will help states to withdraw all forms of restrictions, lending buoyancy to business optimism levels, although risks to businesses prevail from outflows of foreign investment, an increase in lending rates and slowdown in global growth," Dr. Arun Singh commented.