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Business confidence rose to the highest since the series began in November 2012 ina wave of optimism that Narendra Modi would become India’s next Prime Minister and turnaround the economy.
The MNI India Business Indicator rose to 67.0 in May from 61.9 in April. The survey was conducted before the BJP’s landslide win in the Indian elections.
Companies were particularly optimistic about the coming three months, with high hopes that business conditions would improve, helped by a new government.
Optimism was also helped by the recent appreciation of the rupee exchange rate which led to an increase in the proportion of companies reporting that the rupee was helpful for their business for the first time since June 2013.
Inflationary pressures also eased further, with Input Prices falling to their lowest since the series began in April 2013, helped by the appreciation in the rupee.
With prices softening, there were growing expectations among our panel of businesses that interest costs may also follow the same course.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “Business optimism hit a record high even before Narendra Modi’s decisive victory was confirmed, so we’d expect to see a boost next month given Modi’s feel good factor.”
“While our survey suggests that the economy bottomed out some time ago and is on the mend, growth remains lacklustre. While many see Modi as a miracle worker, hehas his work cut out to revive the economy from its weakest in a quarter of a century.”
