As states start to ease lockdown restrictions with declining number of daily COVID-19 cases, companies are hopeful of better performance in the next six to 12 months, according to a joint survey conducted by FICCI and Dhruva Advisors. The nationwide survey showed that 58% of the companies witnessed ‘high impact' of the state-level lockdowns on their businesses, while another 38% reported ‘moderate impact' on their operations.
With various parts of the country under different sets of restrictions and consumer sentiments getting impacted due to the ferocity of the second wave of the pandemic, an evident dip in demand was witnessed by most companies. Further, 58% 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%) and ‘tight financial liquidity' (43%), which emerged as the other significant issues the companies have to deal with in the present situation.
The survey revealed that this time it was not just demand in the urban areas that was constrained, but even the rural areas saw a compression in demand with 37% of the companies reporting a ‘high impact' on their sales in rural markets. The weak demand situation impacted capacity utilisation with 40% of the companies seeing utilisation rates of less than 50% of their installed capacity.
"With different states getting into the ‘unlock' mode, there are immediate indications of improvement in economic activities. This trend is also reflected in the expectations the companies have regarding capacity utilisation over the next 6-12 months," said a FICCI statement. The findings of the survey show that nearly 63% of the companies foresee utilisation rates to be over 70% in the next two to four quarters.
Commenting on the findings, Uday Shankar, President, FICCI, said: "The second wave of the Covid-19 pandemic was particularly challenging. It disrupted normal functioning of businesses and Covid management became a priority, both at personal and institutional levels. With the number of new cases ebbing and states getting into the ‘unlock' mode, there is hope that business and economic activities would regain normalcy in the months ahead.
"Even as we see signs of improvement, we must prepare ourselves well for the subsequent waves. While the survey throws up several suggestions, clearly ‘vaccination at scale' has to be the priority if we have to beat Covid-19 and put it behind us."
A third wave with similar or greater intensity, as is being projected by some experts, could undo the gains seen in the recent weeks, he added.
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 utilisation and demand, the industry is optimistic about the future and hopeful of better performances."
Even as companies brace for improvement, the need for support from the government remains high on their agenda. According to the feedback received in the survey, the MSME sector has faced the maximum brunt and there is an immediate need for relief to this sector.