Reddy calls for immediate sizeable support for industry
Indian businesses are pushing back plans on fund-raising, investments and expansion are being pushed back, according to Dinesh Kanabar, CEO, Dhruva Advisors, who commented on a 380-company survey on COVID-19 pandemic impacts on Indian economy.
Sixty per cent of the surveyed firms have deferred their fund-raising plans for the next 6-12 months while nearly 25% of the firms have shelved them, according to the FICCI-Dhruva survey.
“There is a need to render immediate and sizable support to industry to protect people, jobs, and enterprises,” cautioned FICCI President Dr Sangita Reddy who has set the alarm on the weakening economy.
“Industry members are reeling under severe financial stress and are in urgent need of ample liquidity to ensure business continuity,” she pointed out.
“The Covid-19 pandemic is causing deep economic harm and could reverse the gains made in the industrial economy over many decades,” she cautioned in comments on the results of the survey.
“We are hopeful that the government will introduce a series of measures in quick succession to support demand ensure business continuity. This would be a confidence booster and we hope sentiment will improve following the economic package.”
Almost 380 companies from across sectors in participated in the survey and raised some ‘very important’ issues and insights that should be useful for the policymakers as they plan for the next steps of their integrated approach to support Indian industry.
The magnitude and speed of collapse in economic activity is unprecedented in the last few weeks due to the impact of COVID-19 pandemic, according to an industry survey.
There is tremendous uncertainty about what the future holds for businesses and enterprises as the pandemic is having a deep impact on the Indian economy and industry, concluded a ‘FICCI-Dhruva survey’ released on 21 Apr 2020.
The survey clearly highlights that unless a substantive economic package is announced by the government immediately, the country could see a permanent impairment of a large section of industry, which may lose the opportunity to come back to life again.
Almost 72% of the respondents have reported that covid-19 is having a ‘high to very high’ level of impact on their business.
Further, a substantial majority of the respondents do not foresee a positive demand outlook for their business in this fiscal, with 70% of the survey respondents expecting a degrowth in sales in the fiscal year 2020-21.
A vast majority also foresee a reduction in their business cashflows and company’s order book.
Jobs are also at risk over the coming months as nearly three fourths of the surveyed firms said that they may look at some reduction in manpower in their respective companies.
These findings were revealed in a joint nationwide survey of businesses conducted by FICCI and Dhruva Advisors over the last week, said FICCI in a release on 21 Apr 2020.
The survey was conducted to elicit how enterprises are getting impacted in terms of their business operations; what steps are being planned to maintain business continuity; what is their outlook for business in the FY 2021 and what are their expectations from the government in this hour of crisis.
“The broad-based survey shows the deep impact that Covid-19 is likely to leave on the Indian economy in the short to medium term,” underlined Kanabar in comments on the survey findings.
Businesses will focus on cost optimisation and supply chain management.
“There is a significant expectation from the Government for a financial stimulus and providing liquidity, including by way of tax refunds and cheaper credit, so that the economy returns to normalcy faster,” said Kanabar.
The other notable findings the survey has thrown up includes the impact covid-19 has had on companies’ expansion plans. Results show that in respect of approved expansion plans, 61% expect to defer such expansions for 6 or 12 months, while 33% percent expect to defer approved expansion plans for more than 12 months.
With domestic demand plummeting to record low levels, companies were hoping that exports may provide an outlet for them to energise growth.
While 43% of the surveyed firms reported that they do not foresee an impact on exports, nearly 34% said that exports would take a hit by more than 10%.
As companies battle the financing constraints, all measures have been placed on the table to optimize their costs. Survey results highlight that the cost optimization measures being considered by firms include manpower rationalization, salary rationalization (especially at senior and middle management-level), appraisals, increments, bonuses deferral, reduction in discretionary expenses, freezing recruitments, etc.
Sixty-nine per cent of the respondents believe additional measures, packages should be announced by the government on account of Covid-19 impact.
The key expectations from the government is for tax reliefs, incentives, ease of compliances, and demand creation. Specific support sought from the government and central bank include measures like increase in MEIS/ SEIS rates, releasing pending payments – tax refunds, arbitration awards, additional working capital from banks without collateral to enable business continuity, further cuts in lending rates.
Given the dynamic situation and rapid developments in the business and economic sphere, FICCI and Dhruva Advisors will repeat this survey in another four weeks to assess how the situation is changing.
“Industry is confident that we will win the battle against Covid-19,” said FICCI which is committed to work with the industry and the government to ensure the resumption of economic activity, business continuity and growth.
These goals will require banks, government and industry to work together and creatively craft our future roadmap. The banks should be enabled to lend again, with the need for the RBI to give permission to banks to do a one-time restructuring of all advances and loans.
At the same time, the Finance Minister can give a sovereign guarantee to banks for 40% of new loans and advances up to 20% of their existing limits.
As the government has taken significant measures to safeguard the country health wise and food security wise, it is now time to focus on the economy, said FICCI. fiinews.com
