The net balance of companies predicting activity growth over the coming year doubled in February, up from 17 per cent last October to 34 per cent. The headline figure was at its highest mark since October 2014, with confidence outpacing both the emerging market and global averages (20 per cent and 28 per cent respectively).
Sentiment improved to broadly the same magnitude across both monitored sectors, with the output net balances for manufacturing rising from 20 per cent to 36 per cent, as per the survey.
India’s business optimism soared to its peak in February 2023 since October 2014, according to the HSBC India Business Outlook survey by S&P Global.
The February update shows a significant leap in growth expectations across sectors, with companies forecasting enhanced profitability and expanding their hiring plans amid rising labour costs.
In their positive outlook for output, survey participants identified several key growth opportunities during February, including demand strength and marketing efforts. Besides, newly gained customers and quotations pending approval, alongside diversified offerings and capacity expansion, boosted confidence.
Spurred by expectations that favourable demand conditions will fuel new business intakes, profitability projections brightened in February. Up from the two-year low recorded in October, the net balance of panellists forecasting higher profits increased to 25 per cent. This was the joint-highest reading in nine years, matching that seen in late-2016, and nearly double the global average (13 per cent). Manufacturing companies (28 per cent) were slightly more upbeat towards profits.
With confidence in the outlook for business activity strengthening, sentiment surrounding future job creation improved during February. The net balance of firms planning to recruit additional staff rose from 4 per cent in October to 12 per cent. Indian companies were more upbeat towards job creation than emerging markets combined (5 per cent).
With regards to hiring plans, the uptick in manufacturing was mild (up from 9 per cent to 10 per cent).
There was little change in confidence regarding investment spending over the course of the coming 12 months. The net balance of firms reporting a desire to invest in capital slipped from 11 per cent to 9 per cent, while the respective reading for research and development fell from 2 per cent to 1 per cent.
Manufacturers in India were more likely to report plans to invest in both capital and R&D than, although sentiment levels fell from October at goods producers.
Granular data pointed to diverging trends for inflation expectations among private sector companies in India. Reduced pressure on supply chains and a subsequent improvement in raw material availability tamed non-staff cost inflation expectations. The respective net balance was down to 4 per cent in February, its lowest since mid-2021 and also by far the lowest reading seen worldwide.
Conversely, partly due to robust hiring plans, staff cost inflation looks set to intensify in the year ahead. The proportion of firms predicting an increase outstripped that of a fall by 20 per cent. In this regard, expectations were at their highest since October 2022. Although above the emerging markets reading (14 per cent), the net balance was below the global average (35 per cent).
The latest results indicated that Indian companies remained focused on protecting their margins, with additional cost burdens expected to be passed on to customers amid buoyant demand conditions. At 16 per cent in February, the output charges net balance was above October’s reading but below both its long-run average and the global aggregate.
Looking at the sector breakdown there were broad-based downward revisions to non-staff costs at manufacturers, and widespread increases in expectations for outlays on salaries and wages. Finally, the net balance of manufacturers intending to hike their charges matched that seen in October.
Fibre2Fashion News Desk (DP)
