Economic woes due to Covid-19 to continue beyond April-June quarter: survey
The survey conducted by Assocham and consultancy firm Primus Partners found that more than half of the over 3,550 respondents believe that the government’s measures during the Covid-19 pandemic were not much effective for the industry.Updated: Apr 22, 2020 15:43 IST
The economic impact of the Covid-19 pandemic, which is expected to stretch beyond a single quarter (April-June 2020), has forced about 29% of over 3,550 companies surveyed to “defer or cancel” their investment plans, the Associated Chambers of Commerce and Industry (Assocham) said.
More than half of the respondents found government’s measures not much effective for the industry, the survey, jointly conducted by Assocham and consultancy firm Primus Partners, said.
While 11.5% companies found government’s measures “very effective” for the industry, 34% found them “somewhat effective”. For 27.5% of respondent there was “no effect” of government’s measures, while other respondents clubbed them in the ineffective category, according to the survey.
Commenting on the survey, Nilaya Varma, co-founder of Primus Partners said there is need for the government to spell out a clear message and a plan that is focused on the industry, not just small but large as well. “Large industries in some sense suffering even more – not just have to pay for the employees with no production but also disruption of supply chain and most importantly lack of demand across the world,” he said.
“What we really need is an economic stimulus package that is focussed on sector, sector reforms and direct working capital support to the companies that is immediate. This will provide the confidence to the Indian Industry to continue with its capital investment and expansion plans which in turn will aid a sharp recovery,” Varma said.
Industry associations have been demanding an economic stimulus package ranging between Rs 10 lakh crore and Rs 16 lakh crore.
Since the lockdown, the government and the Reserve Bank of India (RBI) have announced several measures to provide relief to the poor and infuse liquidity in the system. On March 26, the Union finance minister announced a welfare package of Rs 1.7 lakh crore providing food and cash to the poor. The RBI has so far announced two sets of measures, reducing the policy rate to 4.4%, pushing banks to lend more, providing Rs 4.74 lakh crore of liquidity, and easing bad loan norms to ensure the books of banks aren’t awash in red.
The survey said that restrictions on the movement of people and goods have impacted workforce capacity and disrupted supply chain, bringing economic activity almost to a standstill. “While most respondents don’t expect their industry to recover soon, they are also not confident of the effectiveness of measures to support their industry-specific challenges at the state level,” it said.
The survey covered companies across different sectors, including manufacturing, infrastructure and services encompassing all segments -- small, medium and large firms.
It found that the lack of working capital is the biggest worry of the industry (33%), while payment of salaries with output loss was the second biggest pressure point for the 27% of the respondents.
When it comes to business revenue, over 78% of the respondents said the impact in the April-June quarter would be the maximum, while it would stretch to the subsequent quarter as well, the survey said.
As many as 79% of the respondents said the economic impact of the Covid-19 will extend beyond a single quarter and the biggest challenge would be the supply chain, from raw material to intermediates to finished goods and transportation to the consumer destination.
On the manpower issue, the survey found that 36% of the respondents would not change the existing headcounts as they would like to retain the human resource to restart the venture when the economy reopens. However, 26% respondents felt the need to reduce the manpower more than 20% of the payroll because of the current crisis.
Assocham secretary general Deepak Sood expects lockdown to ease after May 3, but the industry will face “a long haul” of challenges till the world finds a medical solution to the coronavirus pandemic.
“It goes to the credit of both employers and employees that we have so far avoided displacement of workforce. Companies are resorting to pragmatic solutions like reducing manpower costs and retaining the head count, while employees are responding well to the fast developing situation being among the most important business stakeholders’,” he said.