CEOs see 40% revenue dip in June quarter: Poll
Two-thirds of Indian chief executive officers (CEOs) expect a 40% revenue decline in the quarter ending June 30 because of the nationwide shutdown for the coronavirus disease and its fallout, manifested by a lack of consumer demand, value chain and labour market disruptions as well as raw material shortages, according to a snap poll conducted by the Confederation of Indian Industry (CII).
More than half the CEOs foresee job losses after the lockdown ends, said the poll. Businesses have largely refrained from layoffs, but the hit suffered by their revenue streams has started causing financial distresses which would deepen if they remain shut longer, making job losses inevitable, the survey warned.
The respondents were mainly representatives of micro, small and medium enterprises (MSMEs), which have borne the brunt of the coronavirus outbreak and its after-effects on the economy.
Forty-five percent of CEOs expect the economy to take more than a year to revive and 36% think the recovery will take six months to a year, the CII poll found.
The CEOs want business operations to be resumed across districts including geographic zones worst hit by the Covid-19 pandemic, subject to strict safety protocols, so that the economy can return to track.
“It is believed that the cost of prioritising actions in such districts would be much smaller in comparison to the economic loss if these businesses have to remain shut,” CII said in its survey report, demanding that all industrial activities -- essential and non-essential -- be allowed to resume in all zones with strict health protocols in place.
India came under the world’s biggest lockdown with effect from March 25 as the Narendra Modi government moved to stop the viral disease from spreading and enforced safe distancing measures, stopping industrial production, shutting commercial establishments, suspending air and rail transport, and taking public transport off the roads. The initial three-week emergency protocol was extended to 40 days until May 3, and by two more weeks until May 17, with a substantial easing of restrictions
The lockdown has helped curb spread of Covid-19 and allowed time for India to build capacity to tackle a possible spurt in cases, CII said, adding that it, however, had also started building pressure on businesses cutting across a large swathe, impairing economic growth prospects.Economic growth this financial year is forecast by the International Monetary Fund to slump to 1.9%, the slowest pace in three decades.
CII proposed identifying districts to restart businesses on the basis of the concentration of industrial and economic activities. “This could be done as per the district’s contribution to the state/country’s GDP [gross domestic products] or industrial estates and clusters or number of enterprises registered in a district,” it said.
“The top 100-150 districts so identified should be specially monitored and provided special attention in containment of the disease and restart of the economic/business operations,” it added.
CII suggested that districts deemed to be pivotal to the economy be allowed additional relaxations that will permit industrial clusters and standalone production facilities, including those not designated as industrial estates, special economic zones (SEZs) or industrial townships, to operate.
The government’s May 1 notification has permitted industrial estates, SEZs and industrial townships with restricted entry in so-called red zones, or hot spot districts, to commence operations.
“The third phase of lockdown necessitates a focused strategy to minimise economic contraction due to Covid-19, without compromising on efforts to control the contagion,” CII said.
Aggressive measures are required to ensure that an industrial district moves from red to orange (areas with a limited number of Covid-19 cases) and green (areas free of the virus) within 21 days, it said.
“The cost of undertaking precautionary measures by way of repeated sanitation, wearing of PPE [personal protection equipment], masks, monitoring, group testing, etc, will be much less than the economic loss if businesses in such high performing districts have to remain shut for longer duration,” said Chandrajit Banerjee, director general of CII.