More than half of the 212 businesses surveyed across the country in the first week of June felt weak demand and managing costs are the biggest challenges for them now. Liquidity and manpower availability are the other key challenges.
New Delhi: Weak demand and managing costs are the biggest challenges businesses are facing today while states are lifting mobility restrictions, according to a nationwide survey.
The survey held by industry body Federation of Indian Chambers of Commerce and Industry (FICCI) showed that more than half of the 212 businesses surveyed across the country in the first week of June felt weak demand and managing costs are the biggest challenges for them now. Liquidity and manpower availability are the other key challenges. High raw material prices and unavailability of industrial oxygen are also major hurdles in the current environment, the survey showed.
Only 38% of the surveyed businesses are using more than 70% of capacity, while 40% are using less than half of their capacity now. However, there is a silver lining--63% expect more than 70% capacity utilisation in next 6-12 months, the survey showed.
The second wave of the pandemic that hit the country during April-May was extremely intense and impacted the functioning of businesses, which had just started moving towards normalcy after the end of the first wave, FICCI said in a statement.
The survey showed that 58% of the companies saw ‘high impact’ on their businesses due to the regional lockdowns. Another 38% reported ‘moderate impact’ on their operations. With different parts of the country under different sets of restrictions and consumer sentiment impacted due to the ferocity of the second wave, an evident dip in demand was witnessed by companies.
This time, it was not just demand in urban areas that was constrained but even rural areas saw a compression in demand with 37% of the companies reporting ‘high impact’ on their sales in rural markets. The weak demand situation impacted capacity utilization with 40% of the companies seeing utilization rates of less than 50% of their installed capacity.
“With the number of new cases ebbing and states getting into the ‘unlock’ mode, there is hope that business and economic activities would regain normalcy in the months ahead. Even as we see signs of improvement, we must prepare ourselves well for the subsequent waves," the statement said quoting Uday Shankar, president, FICCI.
Businesses are also seeking support from the government to tide over these challenges. Of the surveyed businesses, 65% seek relief for micro, small and medium enterprises, while 52% want compliance relief, 49% look forward to loan moratorium and 48% expect incentives to boost demand, the survey showed. To help employees, 49% of companies reimbursed covid related medical expenses or gave wellness allowance, while 47% granted leave for family care or extra paid leave. A fourth of the companies surveyed are looking at mergers and acquisitions or restructuring within the next six months.