The release of the sixth wave of the Business Confidence Index by the Overseas Investors Chamber of Commerce and Industry reaffirmed the shaky sentiments among manufacturers, retailers and service providers in the country.
The benchmark BCI index fell further into the negative territory by nine points in the August 2012 survey, compared to the previous BCI survey back in December 2011.
But there are some other grim takeaways from the publication. Firstly, the survey respondents "indicated no plan to increase employment levels in their business during the next six months".
Further, only 10 percent of the respondents stated they had plans to make capital investments in their businesses over the next six months, while a tiny fraction of these are considering capacity expansion.
Given the burgeoning youth population of the country, the apparent hiring freeze among major corporations operating in the country should sound alarm bells for both policy makers and civil society. While businesses delay recruitment drives because of their concerns over the political climate and state of law & order, scores of fresh graduates are piling into the applicant pool to join thousands of others.
Another area of concern beyond the usual brooding over loadshedding, dismal and deteriorating law & order and poor governance, has to do with businesses perceptions of liberalizing trade across national borders.
Of the respondents questioned by the survey, no less than 40 percent consider granting Most Favoured Nation (MFN) status to India as either negative or very negative for their own business prospects. About 53 percent of the respondents that expressed a neutral view over the same development represent the other side of this coin.
Delving further we find that 48 percent of all retailers in the survey consider the MFN status as negative or very negative for their own business prospects, while 36 percent respondents from manufacturing and 39 percent respondents from services sector share this view.
Meanwhile, 59 percent of those surveyed from manufacturing sector, 53 percent from services and 42 percent from retailing held a neutral perception of liberalized trade with India. It is rather unfortunate that a miniscule percentage of businesses in the country appears excited at the prospects of access to a market of more than 1.22 billion people.
While the fears of some sectors including pharmaceuticals and automobiles may be well founded, many other businesses would be well poised to enjoy a greater target market. To this end, preparation to compete with local and Indian competitors is much more wanting, than fear of the unknown.
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