Need for further stimulus to revive demand in economy: Industry survey

If we have to return to the positive growth trajectory, the time for bold and decisive action is now," Reddy said. The survey results indicate that weak demand continues to be the key bottleneck for companies, with nearly 68 per cent firms reporting it to be their biggest challenge.

There is a need for further financial stimulus to energise and strengthen demand in the economy, which saw 23.9 per cent contraction during the April-June 2020 quarter, according to an industry survey released on Wednesday. The FICCI-Dhruva Advisors survey, conducted in August covering 166 firms, showed that businesses are seeing improvement in some of their operational parameters as the economy is progressively opening up in phases.

However, the setback that has been caused to the India Inc due to COVID-19 will require a much longer period before one sees an improvement in performance on a sustained basis, FICCI said. The chamber said government and regulatory institutions must continue lending strength to businesses through all possible additional measures as well as improvising the already announced set of measures based on feedback from stakeholders.

FICCI President Sangita Reddy said reviving the economy requires sustained efforts, especially when we have seen that in the first quarter, the gross domestic product (GDP) has suffered a major blow. "In the absence of a major fiscal push on the demand side, we could end up being stuck in a quagmire of low demand and low-income cycle. If we have to return to the positive growth trajectory, the time for bold and decisive action is now," Reddy said.

The survey results indicate that weak demand continues to be the key bottleneck for companies, with nearly 68 per cent firms reporting it to be their biggest challenge. Forty-one per cent of the companies polled said their sales in August 2020 were less than 50 per cent of their sales in August last year. Another 21 per cent said sales in August 2020 were between 50-75 per cent of the sales recorded in August 2019.

The participants gave suggestions on measures to support demand which include additional cash transfers for migrant workers, poor and farmers; temporary reduction in GST rates; increase in government procurement; front-ending infrastructure projects, and part-funding of wages. They also suggested that the Centre must come out with a uniform policy for entry of tourists across various states as movement of people will promote growth of the domestic and regional economies.

Sharing their views on the localised lockdowns across states, 84 per cent of the surveyed firms said there was a 'moderate to high impact' on their operations on account of these restrictions. The government-backed Emergency Credit Line Guarantee Scheme (ECLGS) has been a key driver of credit growth during this challenging period, as per the survey. In June 2020, nearly 20 per cent of the surveyed companies had reported that ECLGS has had a beneficial impact on businesses.

The survey shows a jump in this number with 40 per cent of the surveyed companies reporting ECLGS to be effective and helping them deal with hardships caused by the pandemic. Besides, 67 per cent of the surveyed companies said the one-time loan restructuring scheme announced by the Reserve Bank of India will have a beneficial impact on businesses.

The survey participants made suggestions for making the scheme robust and effective. Standard accounts not in default for more than 60 days as on March 1, 2020, should be eligible for restructuring, they said. In case of pending dues from a government entity, either the government should release the funds against the bank guarantee which will be part of the restructuring programme or the government should guarantee the release of these funds, they suggested.

Hospitality, tourism, retail, healthcare, real estate and aviation sectors need a special package, said the surveyed companies. In the previous round of the survey in June 2020, only 25 per cent of the companies had reported that unlocking of the economy had a positive impact on their order books, while in August, their number rose to 44 per cent.

Besides, 51 per cent of the firms surveyed said their cashflows have improved in August, against only 21 per cent in June. Dhruva Advisors LLP Chief Executive Dinesh Kanabar said the survey results are a reflection of the improving state of the Indian economy, after the staggered unlocking.

"In the next phase, it is imperative that the critical business parameters continue to improve in the future and are fast-tracked with government support and stimulus," Kanabar said. He added that this will help the overall Indian economy to be back on the normal growth trajectory faster. In May, the government announced massive new financial package of over Rs 20 lakh crore..

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