Govt stimulus, opening up of economy starting to show results: Survey

The opening up of India's economy post lockdown and implementation of the economic package unveiled by the government have started showing results on the ground with initial signs of improvement in the performance of businesses now visible, says a survey.

The Ficci-Dhruva Advisors industry survey was conducted in June 2020 and saw participation of over 100 top corporate executives (CxOs) from across sectors.

"While the green shoots of recovery are being seen, it is important to emphasise that sustaining this improvement in the operational parameters of businesses will require continuous support from the government.

"The support is particularly needed in the realm of strengthening market demand in the absence of which this initial recovery may fizzle out," Ficci emphasised.

The results of the survey show that presently close to 30 per cent of the firms are operating at 70 per cent plus capacity utilisation, while nearly 45 per cent expect capacity utilisation to be above 70 per cent in the near term.

In terms of the challenges that firms foresee they will continue to face even during the unlocking phase, managing costs, weak demand and financial liquidity remain the top three items with 60 per cent, 59 per cent and 57 per cent reporting the same.

"Some of the survey respondents have also alluded to the second wave of Covid-19 as a challenge they foresee that could affect businesses going ahead. A sudden stop on the imports from China, given the most recent developments, also figured in the feedback received as part of the survey on challenges that could impact businesses," said Ficci on the survey.

On the jobs front, nearly 32 per cent of the firms have reported that they see a job loss of over 10 per cent from their company's perspective. In April edition of this survey, this figure was close to 40 per cent.

Unlocking of the economy is starting to have a positive impact on exports, cash flows, order books and supply chains, it observed.

It revealed that 22 per cent of the respondents have said that exports have improved in recent times. 25 per cent have reported a positive impact of unlocking of the economy on order books and 21 per cent have confirmed improvement in cash flows.

Nearly 30 per cent of the firms are seeing their supply chains getting back on track.

Notably, in the April edition of the survey only 5 per cent of the companies were expecting an increase in exports, 7 per cent had reported increase in order books and 10 per cent expected an improvement in cash flows.

However, the survey results further show that on strategic issues like M&A and FDI, majority of the firms still plan to wait for 6-12 months before decision making.

In the April edition of the survey, 54 per cent of the companies had reported that they would look at M&A in the long term. In June this figure has moved to 75 per cent - a reflection of the recessionary conditions and fast changing business dynamics.

On the economic package related questions, only 1 in 5 companies said that the Emergency Credit Line Guarantee Scheme has started yielding results.

The interest rate reduction by banks has also benefitted just about a quarter of the firms with the gains being modest for most and in the range of 25-50 basis points.

Regarding the questions related to migrant workers, while a majority (53 per cent) of the respondents believe migrant workers will come back as businesses have restarted, industry is requesting for provision of concessional transportation, availability of low rental housing near work-sites, adequate healthcare and medical facilities and subsidised meal programmes to be provided by the government to encourage workers to return.

Further, like MNREGA in rural areas, large scale public works programme for city cleaning, sanitation and plantation of trees can be initiated in urban areas as these would generate jobs for the informal sector workers, according to the survey participants.

On income tax refunds, nearly 36 per cent of the respondents said that they have started receiving income tax refunds from the government.

Almost an equal proportion are saying that the measures taken towards ease of doing business have started yielding results.

On the demand generation side, companies have suggested enhanced cash transfers to the vulnerable sections of society, reduction in GST rates on a temporary basis, widening of the income tax slabs to leave more money in the hands of the people, greater impetus to housing, infrastructure and auto sectors and support to state governments for purchase of buses for city transportation amongst other areas.

Ficci President Sangita Reddy said, "These numbers are on expected lines and underscore the nascent recovery that is currently underway. Given the deep impact on the economy and industry, any improvement will be gradual and with time we hope to see these results improving. Given the evolving situation, it is important that we continue to take measures that are supportive of businesses enabling them to tide over the current crisis as well as prepare well for the long-term opportunities.

Dinesh Kanabar, CEO, Dhruva Advisors said, The survey results show an improvement in sentiments with the unlocking and the implementation of the stimulus package; while this is very welcome, more radical steps need to be undertaken by the government to get the economy back on the growth trajectory, particularly for the sectors which are deeply impacted.