Industry concerned over weak demand conditions

Tribune News Service

New Delhi, May 31

The latest round of FICCI’s Business Confidence Survey has revealed a sharp deterioration in the optimism level of corporate India as compared to the previous survey.

Worsening current conditions and muted expectations about near-term prospects have pulled down the overall index value by over 20 points. The Overall Business Confidence Index stood at 51.5 in the current round after reporting a decadal high value of 74.2 in the previous survey round.

Respondents flagged weak consumer sentiment as their topmost concern followed by non-availability of raw materials and manpower shortage.

In the present round, 70 % of the respondents cited a significant increase in the weak demand situation.

With household income being severely impacted and past savings already drawn down during the first wave of infections, demand conditions are expected to remain weak for longer this time around.

Since the current wave has been deadlier, measures to support demand revival will be crucial. Moreover, the pace of vaccination must be significantly increased for achieving faster normalisation.

The participating companies, however, did report an improved capacity utilisation rate due to localised restrictions instead of a complete lockdown.

About 65 per cent listed increasing raw material costs as a major bother.

Given the evolving situation, the near-term outlook of the participating companies on major operational parameters has been visibly impacted, felt the survey.

The proportion of respondents anticipating better sales prospects in the near term declined significantly to 31% versus 66% in the previous round.

Outlook on employment and exports also reported a discernible deterioration. Only 19% respondents were optimistic about better hiring prospects over the next two quarters (as compared to 35% in the previous round).

Export prospects also worsened noticeably in the current round with only 27% respondents indicating higher outbound shipments as against 41% last time.

Around 80% of the participating companies were facing issues due to the fresh bout of restrictions. But this was lower than 90% participants mentioning lockdown-related difficulties in the last survey.

A large proportion of the companies spoke of problems in availing credit and wanted bans to enhance lending at a reasonable rate.