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D&B Optimism Index touches new low

The Dun & Bradstreet India Business Optimism Index for India for the period April-June 2001, released on Wednesday, reflects negative sentiment prevailing in the business environment across all six indexes for net sales, net profits, selling prices, new orders, inventory levels and employees.

The decline in business optimism that began in Q4 2000 seems to have accelerated in the subsequent quarters.

The falling business expectations are best evidenced by the fact that, in Q2 2001, all but one of the business optimism indexes have touched new lows. In fact, it is for the first time since the inception of the survey that all the business optimism indexes are negative.

The optimism indexes that recorded the sharpest declines were new orders, volume of sales and net profits.

Each of these indexes dropped by over 40 percentage points in Q2 2001 as compared to the levels recorded in the previous quarter.

The downturn in business optimism has occurred despite the fact that the Union Budget 2001-02 was received positively by business circles. Subsequent developments in the stock market and the Tehelka expose have caused business sentiment to deteriorate rapidly.

"The continued decline of the business optimism indexes appears to be driven primarily by political turbulence and recent events in capital markets and the banking sector. The slowdown in the US economy and the threat of cheap imports have also contributed to the souring of business sentiment in the country," said Rajesh Mirchandani, vice-president & managing director, D&B (ASEAN/South Asia).

The D&B Optimism Index is widely recognised as an indicator which measures the pulse of the business community and serves as a reliable benchmark for investors.

The index is arrived at on the basis of a quarterly survey of business expectations.

The survey is conducted on a sample of companies that are selected randomly from D&B's commercial credit file.

The sample selected is a microcosmic representation of the country's business community and includes companies from several sectors including manufacturing, wholesaling, retailing, construction, service sector etc.

Respondents to the survey are asked six standard questions regarding whether specified parameters viz., net sales, net profits, selling prices, new orders, inventories, employee levels, will register an increase, decline or show no change in the ensuing quarter as compared to the corresponding quarter of the previous year.

The indexes are then calculated by subtracting the percentage of respondents expecting decreases from those expecting increases.

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