With businesses across several sectors coming back on stream as part of a phased resumption of economic activities in Unlock 1.0, the implementation of a series of measures, announced earlier as part of the economic package by the Union Finance Minister, is witnessing increasing capacity utilization in the domestic industry. However, concerns over managing costs, weak demand and financial liquidity are continuing during unlocking phase.
Unlocking of the economy is showing a positive impact on exports, cash flows, order books and supply chains, according to a survey conducted jointly by Ficci and Dhruva Advisors. As many as 22 per cent of the respondents said that exports improved in recent times. The Ficci and Dhruva Advisors carried out the industry survey June 2020 and saw participation of over 100 CxOs from across sectors.
Both these measures - the opening up of the economy and implementation of the economic package – have started showing results on the ground and initial signs of improvement in the performance of businesses are now visible.
Participating in the survey, 25 per cent respondents have reported a positive impact of unlocking of the economy on order books and 21 per cent have confirmed improvement in cash flows. Nearly 30 per cent of the firms are seeing their supply chains getting back on track.
The results of the survey show that while currently close to 30 per cent of the firms are operating at 70 per cent plus capacity utilisation, nearly 45 per cent of the firms expect capacity utilisation to be above 70 per cent in the near term.
Dr Sangita Reddy, president, Ficci, said: “These numbers are on expected lines and underscore the nascent recovery that is currently underway. Given the deep impact on the economy and industry, any improvement will be gradual and with time we hope to see these results improving. Given the evolving situation, it is important that we continue to take measures that are supportive of businesses enabling them to tide over the current crisis as well as prepare well for the long-term opportunities.”
Dinesh Kanabar, CEO, Dhruva Advisors, further adds: “The survey results show an improvement in sentiments with the unlocking and the implementation of the stimulus package; while this is very welcome, more radical steps need to be undertaken by the government to get the economy back on the growth trajectory, particularly for the sectors which are deeply impacted. The survey is a clear indicator that we are on a revival path and should now address the key challenges confronted by India Inc i.e. managing costs, weak demand, financial liquidity and also, India Inc’s overwhelming expectation from the government i.e. tax relief/ incentives, ease of compliances.”
As a reference, it may also be noted that in the April edition of this survey only five per cent of the companies were expecting an increase in exports, seven per cent had reported increase in order books and 10 per cent expected an improvement in cash flows.
The writer is a business journalist with 27 years of experience