Mumbai/New Delhi: Aftershocks of demonetisation and worries related to the goods and services tax (GST) implementation have rattled business confidence among India’s chief financial officers (CFOs) in the July-to-September period.

Confidence in the overall financial and macroeconomic conditions for July-September has declined to a six-quarter low, with composite CFO Optimism Index slipping by 11% on an annual basis and by 5.7% on a sequential basis, according to the Dun & Bradstreet India CFO survey, which covered 300 respondents.

The report said optimism among CFOs deteriorated more for the financial performance of their companies than the country’s overall macroeconomic condition. India’s economy expanded 5.7% in the June quarter, its slowest pace in three years, from 6.1% in the three months ago period, according to official figures released in August.

Manish Sinha, managing director, India, Dun & Bradstreet, said, “Concerns related to subdued domestic and weak external demand, strain in the corporate balance sheet, stressed assets in the banking system and the pressure on public finances appear to have contributed to the lower optimism level. For some CFOs, execution of the GST system seem to have taken a toll on their optimism scores."

Technical glitches continued to hound businesses on the last date for filing goods and services tax (GST) returns for August, the second month of the historic indirect tax reform that policymakers pinned their hopes on for boosting the economy’s competitiveness and growth rate. About 25 difficulties that businesses grapple with while using the IT network supporting GST has been flagged to Infosys Ltd, the company that built the network for GSTN, which is responsible for processing indirect tax returns.

Finance minister Arun Jaitley on Wednesday said much of the problems were “self invited" by some of the assessees, who wait for the last date to pay taxes and file returns. Jaitley said that only 25% of the 8.5 million registered assessees had paid taxes and filed returns for August as of Tuesday night, whereas the last date for this is Wednesday.

“The capacity of the system is 1 lakh returns per hour, which is huge. The maximum that could be handled around the clock is 24 lakh returns. If 75% of the assessees wait for the last date, obviously they will invite trouble. Till last night, there was no trouble," said the minister, while appealing to taxpayers to meet their tax obligations well in time.

Economists said that when aggregate demand in the economy for goods and services improves, business confidence will also pick up. “The government could consider maintaining fiscal deficit at 3.2% in 2018-19 rather than trying to bring it down to 3% as per the fiscal consolidation roadmap. Secondly, resources could be raised through disinvestment and public sector enterprises could go for expansion of their capital spending," said D.K. Joshi, chief economist at rating agency Crisil.

The government is considering measures to spur the economic growth rate which has faltered to 5.7% in the June quarter.

A finance ministry official, who asked not to be named, said that if global economic growth picks up momentum, it will fuel manufacturing activities in India as well, although reviving the lost pace is a tough task. The International Monetary Fund in its world economic outlook update in July 2017 retained its projection made in April of a global growth rate of 3.5% in 2017 calendar year and 3.6% in 2018.

Sinha of Dun & Bradstreet said that further strain in corporate balance sheets has added to the already weak risk appetite of CFOs, consequently their expansion plans remain muted, which also has an impact on the optimism score.

The survey report said that optimism for cost of raising funds remained weak for the period under review as only 35% of CFOs expect cost of raising funds to decrease which is the lowest in 11 quarters. Around 59% of CFOs anticipate the level of financial risks for the corporate sector as a whole to remain unchanged as compared to last year, which is the highest since Q2 of 2012.

The survey said that tightening credit appraisal mechanisms and adopting an effective recovery system as a risk management tool has increased compared to the last year quarter.

However, the house estimates that remonetization measures, re-stocking post GST implementation, onset of the festival season, state pay commission hikes and lower lending rates might result in some tailwinds for CFO Optimism scores.

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