The Hindu Business Line : India most optimistic, says Grant Thornton biz report

Bangalore, Aug. 16 India will prove cynics wrong on its economic prospects for the coming year as business owners continue to ride on the optimism of overall environment helping their pursuit.

Despite worries of inflation and shortage of long-term finance for expansion and slight dip in exports, India tops the table as the most optimistic country for the fourth consecutive year, according to the Grant ThorntonInternational Business Report 2007 (IBR) on economic prospects for the year ahead.

Its optimism/pessimism balance of +97 per cent was much higher than many countries. Japan, the most admired industrialised country, recorded a balance of minus five per cent. Businesses in the UK are significantly more optimistic about 2007 at +43 per cent than they were in 2006 at +8 per cent.

(The balance is the difference between the proportion of businesses indicating an increase and those indicating a decrease.)

Its strong GDP growth, higher by 0.4 per cent during FY 2006-07 at 9.4 per cent, strengthened by fixed investment at 11.3 per cent gave an impetus to expansion of industrial production to 11.5 per cent last year. Only the inflation rate raised the hackles at 6.7 per cent, resulting in tight money policy.

The IBR examines the attitudes, plans and trends of 7,200 businesses in 32 countries across six continents. IBR builds on data collected in previous surveys and boasts of a 15-year trend data for EU countries and 5-year trend data for international participants.

Optimism about turnover prospects was higher by nine per cent at +92. Similar was the sentiment on profitability for the coming year (+81 per cent) and employment (+74 per cent).

Expected employment growth in India has risen from 2006 (+69 per cent) to 2007 (+74 per cent), 29 per cent more than the global average of +45 per cent.

However, stress level was higher at 79 per cent compared to 57 per cent in 2006, significantly more than businesses globally (56 per cent). Also Indian business owners reported the longest working hours per week globally at 57 hours.

International trade

The proportion of Indian companies exporting has come down seven per cent from last year to +31 per cent and lower than the global average of 34 per cent.

Globalisation is likely to be seen more as an opportunity (82 per cent) than a threat to business (nine per cent), well above the global average (55 per cent).

Impact on cost pressures

Half of all Indian businesses expect staff costs (51 per cent) and raw material costs (48 per cent) to have a major pressure over the coming year.

Overall these cost pressures are seen as having a greater impact on Indian businesses than businesses globally, particularly with regards to property costs.