Mumbai, May 27:
The MNI India business sentiment indicator, a gauge of current sentiment among BSE listed companies, fell by 2.5 percent to 62.3 in May this year from 63.9 last month.
“Sentiment towards the current business environment and expectations for the future are now both back to pre-Modi levels in a blow to the government as it completes its first year in office”, MNI Indicators, part of the Deutsche Borse Group, said in a statement.
It said the fall in business sentiment left it at the lowest level since April 2014 and together with declines in output and orders points to a significant deterioration in business activity.
“Overall sentiment has reacted positively to the two cuts to benchmark interest rates this year from the Reserve Bank of India, although their impact has proved temporary,” it said.
The companies listed on the BSE reported a significant weakening in both domestic and export orders.
“New orders fell sharply to 57.1, the lowest since May 2013, while export orders declined to 53.6, the weakest since June 2013. The recent weakening of the rupee has yet to have any impact on overseas demand”, the statement said.
The indicator which measures the effect of the Rupee Exchange Rate fell to a four-month low of 45.2 this month, with companies concerned about the increased cost of imports.
It said the input prices increased to 58.6 during this month from 55.9 previously, the highest since October 2014 and look to have troughed in February this year.
“So far, weak demand and competition have kept Prices Received capped although firms’ expectations for the future have been rising in recent months”, it said.
The indicator further revealed that production declined to a near two-year low in May with the manufacturing sector sounding “least ambitious about their future production plans in May,” posting the fifth consecutive decline.
“The May report confirms that the trend in business activity is down with overall sentiment, output and orders all continuing to fall from the last quarter of fiscal year 2015 peak,” chief economist at MNI Indicators, Philip Uglow said.
“Along with the continued soft official data on production and exports, and the low level of inflation, we expect the Reserve Bank of India to decrease rates further at the June monetary meeting,” Uglow said. (IANS)