New Delhi: Domestic business sentiment for the fourth quarter of this calendar year witnessed a decline on concerns regarding political stalemate on reforms front, weak monsoon and volatility in global markets, says a study.
The Dun & Bradstreet Composite Business Optimism Index stood at 122.0 for the October-December quarter, a decrease of 4.1 per cent as compared to July-September period of 2015.
"Extending this year's downward spiral, D&B Composite Business Optimism Index during Q4 2015 declined by 4.1 per cent (q-o-q) as the political stalemate witnessed in the Parliament on two critical pieces of legislation—the Land Acquisition Act and GST Bill raised concerns about the government's ability to go ahead with its reform commitments and dented business confidence," Dun & Bradstreet (D&B) Senior Economist Arun Singh said.
Singh added that monsoon deficiency, weak new investment demand and rising global financial market volatility also operated as "binding constraints" on business sentiment. D&B however noted that the index does not capture the impact of rate cuts by the RBI as the announcement was made post the survey period.
According to D&B, in order to give a sharp boost to business sentiment, the government should go for "targeted measures" that are aimed at encouraging investment.
"For business confidence to get a sharp boost, it is pertinent for the government to shift up several gears from the slow drip-feed of reforms to targeted measures that are aimed at encouraging investment and correcting structural deficiencies in the economy," Singh said.
Going forward, the effectiveness of supply management measures to contain the impact of deficient monsoon would also play a crucial role in shaping business sentiment, he added.
For calculating the composite Business Optimism Index, each of the six parameters -- net sales, net profits, selling prices, new orders, inventories and employee levels—is assigned a weight, before the results are aggregated to arrive at the composite index.
