India business sentiment declines in July as export growth falls: Survey

Friday, 24 July,New Delhi:India’s business confidence dipped slightly in July to below the 12 month average, as output and orders growth moderated and exporters reported weaker demand, a survey said on Friday.

Deutsche Boerse’s MNI India Business Sentiment Indicator, a gauge of current sentiment among BSE-listed companies, fell by 2.7% to 65.3 in July from 67.1 in June, indicating that the impact of June interest rate cut was “short-lived”.

The fall in sentiment was observed across both manufacturing and services companies, while construction companies were the most confident in July.

“July saw business sentiment ebb slightly following June’s improvement on the back of the last rate cut from the RBI,” MNI Indicators Chief Economist Philip Uglow said, adding that “the MNI India Business Sentiment Indicator is now lying a little below the 12-month average, while production is not too far from a two-year low”.

Though the real economy would benefit from a further rate reduction from the Reserve Bank of India, the central bank is likely to remain on hold in its ensuing policy meeting next month, Uglow said.

“While the real economy would benefit from a further rate reduction from the RBI, the central bank’s hands are to some extent tied by the profile for inflation ahead and we expect them to keep rates on hold at the August 4 meeting,” he said.

RBI is scheduled to announce third bi-monthly monetary policy on August 4.

In the June 2 policy review meet, RBI had cut repo rate by 0.25% for the third time this year to spur investment and growth, but hinted that there may not be any more cuts in the near term.

RBI cut the repo rate (short-term lending rate) from 7.5% to 7.25 in June, but left all other policy tools such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR) unchanged at 4% and 21.5%, respectively.