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COVID-19 impact: Collapse in economic activity; jobs at risk, says FICCI survey

The COVID-19 pandemic has had a deep impact on the Indian economy and industry, FICCI in a survey which it conducted jointly with Dhruva Advisors

  • 72 percent of the respondents report ‘high to very high’ level of impact on their business

  • A substantial majority of the respondents do not foresee a positive demand outlook for their business in this fiscal

New Delhi: The COVID-19 pandemic has had a deep impact on the Indian economy and industry. The magnitude and speed of collapse in economic activity that India has seen over the last few weeks is unprecedented and there is tremendous uncertainty about what the future holds for businesses and enterprises, said FICCI in a survey which it conducted jointly with Dhruva Advisors.

Almost 72 percent of the respondents to the FICCI–Dhruva survey have reported that COVID-19 has had 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 percent of the surveyed firms expecting degrowth in sales in the fiscal year 2020-21.

COVID-19 impact: Jobs at risk as companies consider cost-cutting

A vast majority also foresee a reduction in their business cash flows and order book. The survey clearly highlights that unless a substantive economic package is announced by the government immediately, Indian businesses see a permanent impairment of a large section of the industry, which may lose the opportunity to come back to life again. 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.

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.

Unprecedented collapse in economic activity; 70% firms expecting degrowth: Survey https://t.co/fCjPCDBECQ

— FICCI (@ficci_india) April 21, 2020

These findings were revealed in a joint nationwide survey of businesses conducted by FICCI and Dhruva Advisors over the last week. 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 survey saw participation from almost 380 companies from across sectors and has thrown up some very important results and insights that should be useful for the policymakers as they plan for the next steps of their integrated approach to support the Indian industry.

FICCI calls for immediate, sizeable support to industry

Dr Sangita Reddy, President, FICCI said, “The COVID-19 pandemic is causing deep economic harm and could reverse the gains made in the industrial economy over many decades. There is a need to render immediate and sizable support to industry to protect people, jobs, and enterprises. Industry members are reeling under severe financial stress and are in urgent need of ample liquidity to ensure business continuity. 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.”

Dinesh Kanabar, CEO, Dhruva Advisors said, “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. Clearly, the plans prepared by businesses on fund-raising, investments and expansion are being pushed back. 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.”

Survey shows companies are deferring expansion plans

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 percent expect to defer such expansions for a period upto six or 12 months, while 33 percent expect to defer approved expansion plans for more than 12 months. Further, while 60 percent of the surveyed firms have deferred their fund-raising plans for the next 6-12 months, nearly 25 percent of the firms have shelved the same.

With domestic demand plummeting to record low levels, companies were hoping that exports may provide an outlet for them to energise growth. While 43 percent of the surveyed firms reported that they do not foresee an impact on exports, nearly 34 percent said that exports would take a hit by more than 10 percent.