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Photo: iStock
Photo: iStock

The caution that marks our corporate optimism

A Mint-Bain survey of CEOs reveals that many hope to emerge stronger from covid. But even companies that pivot well to a post-pandemic order could be let down by a weak economy

Is India Inc on the verge of a grand separation of trail-blazers and trailers, wedged apart by how well they pivot to a post-pandemic paradigm? Covid-19 has not merely been disruptive, it has wreaked devastation. Its fallout on businesses has been highly uneven, though, as revealed by a Mint-Bain India survey of the hopes and fears of 105 chief executives officers (CEOs) of companies across various sectors. Nearly 80% of them report a financial hit, over half have seen either layoffs or salary cuts in their organizations, over a third suffered supply-chain disruptions, nearly two-thirds worry about crunched consumer wallets, and less than half expect demand to regain its pre-covid levels by year end. Yet, sectors like infotech and consumer staples have fared much better and seem far more hopeful, while real estate, infrastructure and consumer discretionary item firms have been struck hard and remain gloomy. The most remarkable finding, however, is the proportion of CEOs who expect the economy to emerge stronger from our current crisis: as many as 47% foresee covid’s impact as turning out “value accretive" 5-7 years hence. To some extent, this optimism seems based on the pandemic being taken as a prod by India Inc to rejig operations, slash costs and unlock efficiencies in adapting to post-covid business realities.

The pressure to achieve lean operations has rarely been higher. So far, payroll reductions have played a key role in cost compression, it appears, at least in the worst-hit sectors. Human resource issues, be it work-from-home (WFH) or employee engagement, head the list of immediate CEO priorities, with increased automation and faster decisions next on their chart. Their responses suggest that WFH remains an unsettled issue, with diverse views on whether it should outlast the pandemic. But other wrenching transformations are in the air too. Most CEOs foresee structural changes within their sectors, marked by disruptive innovation and new patterns of consumer preferences. It is no surprise that the adoption of digital tools is a hot item on their agenda for the next 12 months, with revenue recovery and a return to growth a close second. Their to-do list also includes transformative cost reduction, business model adaptation, a supply-chain rehaul, and an effort to make the most of fresh opportunities. With their strategies redrafted, many CEOs appear confident of turning adversity into an eventual advantage.

It is plausible that we will see a divergence within India Inc over the next half decade or so. But any such forecast needs to be tempered by a big uncertainty that haunts all corporate optimism. Internal reforms and strategic revisions are necessary but not sufficient for value accretion. And CEOs seem aware that it is dicey whether commercial conditions will support their pivot, no matter how spot-on it is. In their top order of major worries, India’s limited fiscal and monetary space to revive the economy ranks just above the consumer’s crunched ability to buy stuff, with post-pandemic unrest not far behind. These could prove costly. And even the best laid plans of CEOs could be let down by money failing to move around the country at its pre-covid pace in another, say, 5-7 quarters. By the survey, their revival hopes are pinned chiefly on a stimulatory tripling of government infrastructure spending. Lower goods and services tax rates, wage support for small enterprises, and an income tax waiver also feature on their wish list. Hopes that ride on policy responses, however, are subject to varied risks.

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