Survey: GST Impact on Consumption and Investments

After a brief uptick, business confidence plummets again with corporate leaders expecting a negative impact of GST on consumption and slowdown in investments, finds the latest Business Today-C fore Business Confidence Survey.

- Manu Kaushik

Just as corporate India is recuperating from the effects of demonetisation, the rollout of the goods and services tax (GST) has caused jitters. Corporate sentiment has dipped to its second-lowest level in the April-June period. The confidence level, on a scale of 100, slipped to 47.3 in the first quarter of 2017/18. In comparison, confidence level stood at 49.6 during January March 2017 and 46.4 in October December 2016, the lowest ever. The business confidence index (BCI) in the same quarter last year stood at 51.5.

After a sharp fall at the end of last year, business confidence jumped in the first quarter of the calendar year 2017, giving an impression that businesses have shrugged off demonetisation fears. The current slump indicates that corporate leaders have turned pessimistic due to the uncertainty around GST execution and slowdown in investments.

The BCI was initiated by Business Today in the January-March quarter of 2011. Just like in every quarter, market research agency C fore quizzed 500 CEOS and chief financial officers across 12 cities for the survey.

“The 6.1 per cent GDP growth in the January-March period was a confirmation of the slowdown. The dip in sentiment is largely attributed to that. The sentiment should go up with GST,” says D.K. Joshi, chief economist at ratings agency CRISIL.

The survey indicates that business leaders are worried about a host of issues such as production level, utilisation of capacity, investments, sales, exports and hiring activities. For instance, 40 per cent expect sales to drop in the July-September period. In the previous survey, 21 per cent respondents were expecting the same.