You could say that smart money has the news before the rest of us. Or perhaps there is power in positive thinking! Back in March 2014, the Overseas Investors Chamber of Commerce and Industry reported the findings of the eighth wave of its Business Confidence Survey. One of its surprising findings was that businesses appeared upbeat about FDI prospects in the future, even as the country struggled to meet key conditions set forth by the IMF.
Thirteen months later, business confidence as measured by the OICCI index is at its highest level since the chamber began formulating this index. Among key developments fuelling optimism, is the expectation of unprecedented investment inflows from China.
There are of course, other reasons that impact perceptions in the here and now. Sizeable drop in international oil and commodity prices has slashed the cost of doing business; confrontational politics of sit-ins and gate crashes appears to have subsided; and law and order conditions have reportedly improved.
In a nutshell, the “BCI showed a significant growth from 16% in September 2014 to 48% in the latest wave”; and that “compared to September 2014, businesses think the future is bright.” But the survey reveals businesses are still not willing to put their money where the mouth is.
Even though the proportion of businesses that expected to expand in the next six months, relatively few (29%) “have plans for capital investment”. Also, while sentiments regarding new orders and new investments have improved considerably in the latest survey; most businesses are still quite sure they will not conduct any significant new hiring (besides replacements).
Energy constraints, weak external demand and government policies are the main reasons quoted by businesses to remain shy from expansion despite higher confidence. It may also be argued that plans to enhance workforce is dependent on sustained growth, not glimmers of improvement. So employment growth may simply be lagging and not lacking. However policy makers would do well to shift focus from stabilization, towards economic growth; particularly in sectors that can provide more jobs to accommodate the ever increasing influx to the work force.
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