The latest round of Federation of Indian Chambers of Commerce & Industry (FICCI's) Business Confidence Survey revealed sharp deterioration in the optimism level of corporate India vis-a-vis the previous survey. Worsening current conditions as well as muted expectations about the near-term prospects on the back of a sweeping second wave of coronavirus infections pulled down the overall index value by over 20 points. The Overall Business Confidence Index nosedived and stood at 51.5 in the current round after reporting a decadal high value of 74.2 in the previous survey round.
However, the Overall Business Confidence Index in the latest round was higher than the value of 42.9 (which was the lowest since the financial crisis) registered a year back. In the present round, the proportion of respondents citing weak demand situation once again noted a significant increase. 70% participants reported weak demand conditions as a bothering factor in the current survey as compared to 56% stating the same in the previous round. The corresponding number a last year was 77%.
With household income being severely impacted and past savings already drawn down during the first wave of infections, demand conditions are expected to remain weak for longer this time around. Since a much larger proportion of the population has been impacted in the current wave, there has been permanent impairment to income for many households who have faced job losses or have lost bread earners to COVID-19. Measures to support demand revival will be crucial for the economy to recover from the latest pandemic induced shock. Moreover, pace of vaccination must be significantly increased for achieving faster normalization.
The participating companies, however, did report improved capacity utilization rate in the present survey despite weak demand conditions. This can be attributed to imposition of localised restrictions instead of a complete lockdown, which ensured industry remaining largely functional throughout.
Powered by Capital Market - Live News