Second Covid-19 Wave Has Impacted Business Confidence, Says Industry Body

The overall business confidence index plunged to 51.5 in May from a decadal high value of 74.2, signalling a sharp deterioration in the optimism level of corporate India, industry body
Federation of Indian Chambers of Commerce & Industry (FICCI) said in its Business Confidence Survey report for the month. "The overall business confidence index has nosedived to 51.5 in the current round after reporting a decadal high value of 74.2 in the previous survey round,' the industry body said, as a record surge in second wave of Covid-19 infections impacted business sentiment across the country.

Weak consumer sentiment, non-availability of raw materials and manpower shortages are the topmost concerns, according to the survey participants. Increased exposure to risks and logistical delays resulting from the fresh round of lockdowns also constrain the business environment.

As much as 70 per cent of the participants in the survey cited weak demand as a factor in reduction of business confidence levels. A large proportion of the population has been impacted in the current wave, with many households facing job losses or loss of bread earners to the virus, leading to a reduction in income levels and resultant impact on the demand situation.

Furthermore, 65 per cent of the participants said that increasing raw material costs was a major factor for the fourth consecutive survey round. The survey participants also flagged shortage in manpower owing to factors such as increased infections within the family and travel hesitancy.

The outlook on employment was also bleak, with only 19 per cent of the respondents believing that hiring prospects would get better over the next two quarters. Export prospects also worsened noticeably, with only 27 per cent of the respondents indicating higher outbound shipments in the near future.

On the positive side, the participating companies reported improved capacity utilization rates despite weak demand conditions as imposition of localised restrictions ensured that industry remained largely functional.

Regarding the road ahead, the respondents said that measures to support demand revival and faster vaccination are crucial for the economy to recover from the pandemic-induced shock. The government should focus on controlling cases, ensure strict adherence to Covid-appropriate behavior and more importantly, increase the pace of vaccinations, they suggested. Vaccinations would act as the biggest stimulus to Indian economy and decouple it from another pandemic-induced shock, they reckoned.