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Unprecedented Collapse In Economic Activity Due To COVID-19: FICCI-Dhruva Survey
The COVID-19 pandemic is causing deep economic harm and could reverse the gains made in the industrial economy over many decades
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The magnitude and speed of collapse in economic activity that India has seen over the last few weeks due to COVID-19 pandemic are unprecedented and there is tremendous uncertainty about what the future holds for businesses and enterprises, according to a recent survey by FICCI and Dhruva Advisors.
Almost 72 per cent of the respondents to the survey reported that COVID-19 is having 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 per cent of the surveyed firms expecting degrowth in sales in the fiscal year 2020-21. A vast majority also foresee a reduction in their business cashflows and company's order book. The survey clearly highlights that unless a substantive economic package is announced by the government immediately, there could be a permanent impairment of a large section of industry, which may lose the opportunity to come back to life again.
"Jobs are also at risk over the coming months as nearly three-fourth of the surveyed firms said that they may look at some reduction in manpower in their respective companies." These findings came up in a joint nationwide survey of businesses conducted by FICCI and Dhruva Advisors over the last week.
The survey was conducted to find 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 FY21 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 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.
"The COVID-19 pandemic is causing deep economic harm and could reverse the gains made in the industrial economy over many decades," said FICCI President Sangita Reddy.
"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," she said.
"We are hopeful that the government will introduce a series of measures in quick succession to support demand and ensure business continuity. This will be a confidence booster and we hope sentiment will improve following the economic package," said Reddy.
Dinesh Kanabar, Chief Executive Officer of 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," he said.
The other notable findings the survey has thrown up include the impact COVID-19 has had on companies' expansion plans. Results show that in respect of approved expansion plans, 61 per cent expect to defer such expansions for a period up to 6 or 12 months while 33 per cent expect to defer approved expansion plans for more than 12 months.
Further, while 60 per cent of the surveyed firms have deferred their fund-raising plans for the next 6 to 12 months, nearly 25 per cent 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 per cent of the surveyed firms reported that they do not foresee an impact on exports, nearly 34 per cent said that exports will take a hit by more than 10 per cent.