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India Business Sentiment Joint-Lowest On Record

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India's business confidence fell to its joint-lowest on record as companies were concerned about the cooling economy and government policies, survey data from IHS Markit showed Monday.

The net balance of firms expecting output growth in coming twelve months fell to +15 percent in June from +18 percent in February. A similar score was last reported in June 2016 and was the joint-lowest since October 2009.

The survey showed that water shortages, public policies and weak sales weighed on sentiment in June. They were also worried about potential rupee depreciation lifting import prices, lack of skilled labor and possible tax hikes.

However, hopes of pro-business government policies and a better financial flow continue to underpin optimism towards output and profitability growth in the year ahead, Pollyanna De Lima, principal economist at IHS Markit, said.

Companies plan to increase their capacity by hiring additional workers. Service providers are more likely to create jobs than manufacturers.

According to the survey, capital investment in India looks set to rise in the coming year. Nonetheless, the net balance of companies expecting growth is unchanged from February, and below both the global and emerging market averages.

At the same time, confidence for research and development spending turned positive in June.

Although companies foresee higher non-staff and staff costs in the medium-term, inflation expectations were among the weakest worldwide.

On profitability, the survey showed that sentiment has faded since February, with the proportion of companies predicting growth exceeding those expecting a contraction by 15 percent.

The business outlook survey reports are produced on a triannual basis, with data collected in February, June and October. The latest survey was carried out between June 12 and 26.

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