Industry expects Govt’s bold steps to tackle the economic challenge
All eyes are on the upcoming Budget 2021-22, says recently appointed FICCI President Uday Shankar, noting the Government’s efforts to seek economic growth inducing ideas.
Shankar made the comments on 28 Dec 2020, following the release of an industry-wide survey on the ongoing industrial and economic recovery.
The encouraging momentum, as highlighted in the survey, needs to be built upon, he added, pointing out that “now all eyes are on the upcoming budget.
“The Government has been seeking growth-inducing ideas and we have shared several suggestions. The context of this budget is completely different due to an unprecedented social and economic challenge.
“We are sure that the Government will take bold steps to respond to these challenges,” said Shankar.
“The survey results portray a continued improvement in the business environment in India, with weak demand and managing costs still remains India Inc’s key challenges,” added Dinesh Kanabar, CEO, Dhruva Advisors LLP, the survey’s co-author with FICCI.
“The vaccine news has infused optimism among businesses. Given the impact of the pandemic on the economy, the Union Budget 2021-22 is one of the most anticipated budgets.
“It would be interesting to observe the growth-oriented measures, which are introduced and if tax cut proposals are tabled,” Kanabar said of industry-wide expectations.
Recently, production-linked incentive schemes have been introduced for several sectors, which is definitely a step in the right direction.
He called on the Government to focus on building a robust manufacturing ecosystem to leverage the opportunity of making India a global manufacturing hub.
The FICCI-Dhruva Advisors Survey conducted in December 2020 confirms that members of India Inc are expecting even better results in 2021.
The opening up of the economy and implementation of a broad set of measures, under the Atmanirbhar Bharat package, have led to a continuous improvement over time in the performance of businesses.
The prospect of an introduction of a vaccine for COVID-19 early next year has improved the confidence level of businesses. Almost 74% of the survey participants have said that they foresee a significant positive impact on their business once the vaccine is made available.
COVID-19 induced travel restrictions have limited the ability of companies to undertake business operations efficiently and 74% of the survey participants have validated this. To overcome this challenge and maintain business operations, companies have leveraged digital tools for communication.
Given the benefits of technology, 64% of the surveyed companies have said that moving forward they will use a mix of travel and virtual meetings even after the situation becomes normal.
Another major outcome of COVID-19 is the likely shift in global supply chains away from China to other economies. Nearly 70% of the survey participants have said that India could benefit from this move. They expect a fair share of manufacturing to shift from China to India in the near future.
To capitalize on the opportunities that could come India’s way, there is a need to strengthen India’s manufacturing ecosystem. Under the Atmanirbhar Bharat package, the Government has introduced several measures to address the immediate pain points of the economy as well as steps to improve India’s manufacturing competitiveness.
These measures have been well received by the industry, with 45 percent of the companies rating the latest set of announcements made under Atmanirbhar Bharat package 3.0 as ‘good to excellent’.
The results of the December 2020 survey also indicate that there has been a further improvement in the performance of companies compared to the situation in August 2020.
With improvement seen in the economy, nearly 40% of the surveyed companies are currently operating at a capacity utilization level of over 70%, vis-a-vis 30% of the companies in August 2020.
Other indicators of improving business performance in the December 2020 survey are related to order books and exports. Nearly 50 percent of the companies have reported that they have seen an increase in their order books and about 40% have said that their exports have increased. In the August 2020 survey, the corresponding figures were 44% and 30%, respectively.
Even as we see signs of improvement in the performance of businesses, the impact of COVID-19 still lingers. Survey results show that businesses continue to face challenges on account of weak demand (59%), managing costs (54%) and financial liquidity (48%).
Given this, survey participants expect both government and RBI to continue with their support measures even next year. There is a strong demand that the upcoming budget must prioritize growth-oriented measures, including a cut in direct tax rates. #economy #manufacturing #investment #industries #investment /fiinews.com