The Rs 130 billion PNB scam and fiscal slippage are among factors that have led to a sharp decline in business optimism for the June quarter, a report said on Monday.
The optimism was rising in the September quarter of last year and hit a peak of 91 per cent for the first quarter of 2018, information services company Dun and Bradstreet said in the report, adding it has slipped by 6.6 per cent to 85 per cent for the second quarter of the calendar year.
The report said the survey of companies was conducted in March, when the bank fraud cases had already erupted on the scene and added that the frauds and scams came at an “inopportune” time when the state-run lenders were already fighting the non-performing asset (NPA) menace.
On the fiscal deficit front, the overshooting of the FY18 and budgeting for an elevated target for the next fiscal year have led to increased borrowing by the government, the report said, stressing on the need for the government to fix its own balance sheet along with that of the state-run banks.
Other factors such as the squeeze on low-cost trade finance due to the discontinuation of the letter of understanding following the PNB scam, rising protectionism in the US which is making the exporters nervous and widening of current account deficit have also led to concerns, it said.
“All the above factors might have impacted the sentiment of India Inc as business optimism index witnessed a decline from last quarter,” the report said.
However, when compared with the same period last year, the optimism index has grown by 7.6 per cent, it added.
On a sectoral basis, the intermediate goods sector emerged as the most optimistic, while the construction sector the least optimist.
There was a two percentage point decline in the number of people expecting an increase in sale, five percentage point decline in those expecting an increase in net profits and a three percentage point decline in the number of people who feel their order book will be growing.