Mumbai, November 06, 2020: The Dun & Bradstreet Composite Business Optimism Index stands at 46.2 for Q4 2020, an increase of 57.4% as compared to the Q3 2020 survey. Five out of six optimism indices have registered an increase as compared to Q3 2020. The Dun & Bradstreet Composite 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).
“Dun & Bradstreet’s Composite Business Optimism Index (BOI) has reversed its declining trend in Q4 2020 and increased by 57% from the record lows witnessed in Q3 2020. However, the survey also revealed that optimism of respondents in the services sector has remained subdued and lower than the industrial sector across all parameters including sales, new orders, net profits, level of selling price and employees. Businesses from the services sector, especially hospitality, tourism, retail and entertainment have been significantly impacted by the COVID-19 social distancing restrictions given the contact-intensive nature of the industry.
“The improvement in the optimism level amongst businesses in the manufacturing sector emanates from the surge in demand as more economic activities were allowed under ‘Unlock 4.0 and 5.0’. The various measures taken by the Reserve Bank of India (RBI) and the government to boost consumption demand during the festive season, and the investment demand by allocating additional funds for capex of the central government, providing states interest free capex loans and buying state development loans (SDLs), might also have strongly driven the optimism levels. Further, the fall in active cases of COVID-19 infected persons and the improvement in recovery rate have also supported the sentiment of businesses. If the optimism level amongst businesses continues to improve, it will indicate a steady recovery in growth; a fall in the levels will signify any recovery to be only short-lived” said Arun Singh, Global Chief Economist, Dun & Bradstreet.
Key findings from the survey
Around 53% of the respondents expect volume of sales to increase in Q4 2020, as compared to 24% in Q3 2020, an increase of 29 percentage points. While around 18% expect it to remain unchanged, around 29% expect the volume of sales to decline.
40% of the respondents expect an increase in net profits in Q4 2020, as compared to 27% in Q3 2020, an increase of 13 percentage points. 29% expect net profits to remain unchanged, while 31% expect it to decrease.
81% of the respondents expect no change in the selling price of their products in Q4 2020. 12% of the respondents expect the selling price of their products to increase during Q4 2020, while 7% expect a decline.
43% of the respondents expect their order book position to improve in Q4 2020, as compared to 22% in Q3 2020, an increase of 21 percentage points. While 40% of the respondents expect new orders to remain unchanged, 17% anticipate new orders to decrease.
24% of the respondents expect their inventory level to increase during Q4 2020, as compared to 11% in Q3 2020. While 64% anticipate no change in inventory level, 12% expect inventory level to decline.
Around 15% of the respondents expect an increase in the size of their workforce employed during Q4 2020 compared to 16% in Q3 2020, a decrease of 1 percentage points. While around 77% anticipate no change in the number of employees, 8% expect their workforce size to decline.
The Dun & Bradstreet Business Optimism Index is an indicator and measure of the pulse of the business community. The index is arrived at on the basis of a quarterly survey of business expectations.
The survey is conducted on a sample of companies that are selected randomly from Dun & Bradstreet’s commercial credit file. The sample selected is a microcosmic representation of the country’s business community and includes companies from several sectors including basic goods, capital goods, intermediate goods, consumer durables, consumer non-durables and service sectors. All the respondents in the survey are asked six standard questions regarding their expectations as to whether the following critical parameters pertaining to their respective companies will register an increase, decline or show no change in the ensuing quarter as compared to the same quarter in the prior year: Volume of Sales, Net Profits, Selling Prices, New Orders, Inventories and Employees. The individual indices are then calculated by the percentage of respondents expecting an increase.
For calculating the Composite Business Optimism Index, each of the five parameters (excluding inventory) is assigned a weight. The positive responses for every parameter for the period under review are expressed as a proportion of positive responses in the base period (2011). The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.
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