Participating companies stressed the need for another tax package, focused on demand response, as well as job-based incentives for employers to avoid job loss.
Deteriorating current conditions and muted short-term expectations due to the second wave of the coronavirus pandemic have led to a “sharp deterioration” in overall business confidence in India, according to a survey by the Federation of Chambers of Indian Trade and Industry (FICCI).
According to the “Business Confidence Survey”, the participating companies “unanimously felt that the government should focus on controlling the cases of covidy first and foremost,” and only a massive vaccination campaign can dissociate the Indian economy from another shock induced by a pandemic.
In addition, they stressed the need for another demand-driven tax package as well as job-based incentives for employers to avoid job loss.
The overall business confidence index fell to 51.5 after reporting a 10-year high of 74.2 in the previous round of the survey released in March 2021, the industry body said.
About 70% of respondents said weak demand was a hindering factor in the current survey, compared to 56% saying the same in the previous cycle. The corresponding number last year was 77%. “With household income severely affected and past savings already depleted in the first wave of infections, demand conditions are expected to remain weak longer this time around,” the survey said.
He added that since a much larger proportion of the population has been affected by the current wave, there has been a permanent decrease in income for many households that have suffered job losses or lost. their livelihood because of COVID-19.
About 180 companies with revenues ranging from ₹ 1 crore to ₹ 60,000 crore, responded to the survey, which was conducted during the months of April / May 2021 to assess respondents’ expectations for the period of time. ‘April to September 2021.
“Measures to support the recovery in demand will be crucial for the economy to recover from the latest shock induced by the pandemic. In addition, the pace of vaccination must be increased considerably to achieve faster normalization, ”he stressed.
However, participating companies reported an improvement in the capacity utilization rate in this survey despite weak demand. This can be attributed to the imposition of localized restrictions instead of a complete lockdown, which has allowed the industry to remain largely functional everywhere.
Survey participants cited rising raw material costs as a “major inconvenience” for the fourth consecutive round of investigation. “… the proportion of respondents predicting better short-term sales prospects has decreased significantly to 31% from 66% of respondents who said the same in the previous cycle … and the proportion of respondents citing higher profits over the next six months dropped to 16% in the latest survey with 36% of respondents stating the same in the previous cycle, ”he said.
In addition, only 19% of respondents were optimistic about better employment prospects over the next two quarters, while only 27% of respondents indicated higher export prospects.
Regarding the impact of localized restrictions on businesses, around 80% of participating businesses reported facing problems in doing their business.
The companies pointed out that the entire loan approval process has become extremely long, which is seriously affecting business prospects. “The participating companies felt that any refusal by banks to lend to companies must be supported by a reason and that the same must be formally communicated as this would increase transparency,” said the survey.
In addition, participating companies also called for an extension of the moratorium on loans, principal and interest payments, for at least another six months, and stressed the need for a stable interest rate regime for about 12 to 18 months.
“On the tax front, companies unanimously felt the need for another tax package, mainly focused on demand. Demand stimulus measures such as direct income support for the rural and urban poor, income tax cuts for the middle class and temporary indirect tax cuts need to be urgently considered ”, did he declare.