The FICCI - Dhruva Advisors Survey stated today that with states getting into the ‘unlock’ mode, there are early indications of improvement in economic activity and the companies are hopeful of better performance in the next 6 to 12 months.
As per the survey, 58 percent of the companies reported a high impact on their businesses due to the state level lockdowns while another 38 percent reported a moderate impact on their operations.
"With different parts of the country under different sets of restrictions and consumer sentiment impacted due to the ferocity of the second wave, an evident dip in demand was witnessed by companies, the survey said.
About 58 percent of the surveyed companies reported weak demand as the biggest challenge they are facing under the current environment. This was followed by managing costs (56 percent) and tight financial liquidity (43 percent) that emerged as other significant issues companies have to deal with in the present situation, it added.
The survey however noted that about 63 percent of the companies expect the utilization rates to be over 70 percent in the next two to four quarters.
"While the impact of the second wave induced lockdowns on businesses is clearly visible, there is a silver lining on the horizon. This relates to expectations about business performance over the next 6-12 months. With different states getting into the ‘unlock’ mode, there are immediate indications of improvement in economic activity. This trend is also reflected in the expectations companies have regarding capacity utilization over the next 6-12 months," the survey said.
Commenting on the survey results, Dinesh Kanabar, CEO, Dhruva Advisors said, "The survey reflects the impact of the second wave on the Indian economy and the sentiments going forward. While there is an immediate effect on the businesses in terms of capacity utilization and demand, the industry is optimistic about the future and hopeful of better performances. Importantly, there is a significant expectation from the Government that we are well-prepared for subsequent COVID-19 waves."
While the companies brace for improvement, as per the feedback received from the companies in the survey, the need for support from the government remains high on their agenda. Among the relief other measures that were listed by the companies included ease of compliances, moratorium for loan and interest payments and incentives for boosting demand.
On the taxation side, some of the key reforms that the companies wish to see includes - reduction in the tax rates, reduction in compliances and expediting refunds.
The companies have further noted that the MSME sector has faced the maximum brunt and there is an immediate need for it.
Furthermore the companies have also noted that the government must ramp up investments in health infrastructure particularly in the tier 2, 3 cities and the rural areas and maintain a sufficient pool of essential medicines for COVID-19 management.
They have further noted that the government must take all steps to scale up vaccination drive in the country by setting up a national facility for vaccine manufacturing with government funding and the government must also strengthen the testing infrastructure across the country.