Global Uncertainty Pushes India's Business Confidence To Three-Year Low: HSBC

New Delhi, Jul 11 (KNN) Business confidence among India's private sector companies has fallen to its lowest level in nearly three years amid global uncertainty following the Middle East conflict, according to the latest HSBC India Business Outlook survey compiled by S&P Global.

Business Optimism Falls To Three-Year Low

The survey showed the net balance of firms expecting higher business activity over the next 12 months declined to 22 percent in June from 35 percent in February, marking the weakest level of optimism since October 2023.

Businesses attributed the subdued outlook to rising input costs, weaker demand, volatile commodity prices, currency fluctuations, policy and tax uncertainty, and higher costs associated with adopting greener technologies and complying with environmental regulations.

Global Uncertainty Weighs On Sentiment

Pranjul Bhandari, Chief India Economist, HSBC, said optimism regarding business activity and profitability had dropped to its lowest level in nearly three years due to global uncertainty.

Despite the decline in sentiment, India's profitability outlook remained stronger than global peers. The survey recorded a profitability net balance of 15 percent, compared with the emerging market average of 5 percent and the global average of 9 percent.

Firms Continue To Back Investments

Companies also continued to prioritise investment despite weaker earnings expectations. The net balance for planned capital expenditure increased to 19 percent in June from 17 percent in February, while planned spending on research and development rose to 12 percent from 5 percent.

Businesses said investments would focus on new product development, digital transformation, artificial intelligence, production expansion, software adoption, and geographical expansion.

Hiring Plans Ease As Cost Pressures Rise

Hiring intentions, however, weakened during the period, with the net balance of firms planning to increase employment falling to 10 percent in June from 17 percent in February. Manufacturers remained relatively more optimistic about hiring than service sector firms.

The survey further found that expectations for non-staff cost inflation reached their highest level since October 2024, reflecting anticipated increases in fuel, energy, raw material, transportation and other operating expenses.

However, India remained among the least concerned markets globally on this measure.

Confidence Weakens Across Major Economies

The report noted that business confidence weakened across most major economies following the outbreak of the Middle East conflict, with optimism improving only in Spain and the United States.

(KNN Bureau)