High to very high impact of COVID-19 on 72% firms in India

April 24, 2020 - India

The magnitude and speed of collapse in economic activity that India has seen over the last few weeks is unprecedented and there is tremendous uncertainty about what the future holds for businesses. Almost 72 per cent of respondents in a recent industry survey have reported that COVID-19 is having a 'high to very high' level of impact on their businesses.

Further, a substantial majority of the respondents do not foresee a positive demand outlook for their business in this fiscal, with 70 per cent of the surveyed firms expecting a de-growth in sales in fiscal 2020-21, according to the survey, jointly conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) and tax consultancy Dhruva Advisors.

A vast majority also foresee a reduction in their business cash flows and company's order book.

The survey clearly highlights that unless a substantive economic package is announced by the government immediately, India could witness a permanent impairment of a large section of industry, which may lose the opportunity to come back to life again.

Jobs are also at risk over the coming months as nearly three fourths of the surveyed firms said that they may look at some reduction in manpower in their respective companies.

The survey, which covered 380 companies from various sectors, showed 61 per cent of the respondents expect to defer approved expansion plans for up to 6 or 12 months, while 33 per cent expect to defer such plans for more than 12 months. Further, while 60 per cent have deferred their fundraising plans for the next 6-12 months, nearly a quarter of the firms have shelved the same.

With domestic demand plummeting to record low levels, companies were hoping that exports may provide an outlet for them to energise growth. While 43 per cent of the respondents reported that they do not foresee an impact on exports, nearly 34 per cent said exports would take a hit by more than 10 per cent.

Cost optimisation measures being considered by firms include manpower and salary rationalisation, deferral of appraisals, increments and bonuses, reduction in discretionary expenses and freezing recruitment.

Sixty nine per cent of the respondents believe additional measures and packages should be announced by the government. The key expectations are tax reliefs and incentives, ease of compliances and demand creation.

FICCI and Dhruva Advisors will repeat this survey in another four weeks to assess how the situation is changing.