The overall business confidence in India has plunged due to the devastating effect of the second wave of COVID-19 in the country. As a result, the overall Business Confidence Index nosedived and stood at 51.5 in the current round after reporting a decadal high value of 74.2 in the previous survey round, according to the latest round of FICCI’s Business Confidence Survey.
Worsening current conditions, muted expectations about the near-term prospects on the back of a sweeping second wave of coronavirus infections pulled down the overall index value by over 20 points vis-a-vis the previous survey was.
At the same time, the Overall Business Confidence Index was higher than the value of 42.9 (which was the lowest since the financial crisis) registered a year back.
About 70 per cent participants reported weak demand conditions as a bothering factor in the current survey as compared to 56 per cent stating the same in the previous round. The corresponding number a last year was 77 per cent. Furthermore, participants in the survey cited increasing raw material costs as a major bothersome factor for the fourth consecutive survey round. About 65 per cent of them stated higher raw material costs as a constraining factor in the present survey as compared to 59 per cent stating likewise in the previous round.
"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 a much larger proportion of the population has been impacted in the current wave, there has been permanent impairment to income for many households who have faced job losses or have lost bread earners to COVID-19. Measures to support demand revival will be crucial for the economy to recover from the latest pandemic induced shock. Moreover, pace of vaccination must be significantly increased for achieving faster normalisation," FICCI said.
On the fiscal side, "companies unanimously felt the need for another fiscal package", focusing majorly on addressing the demand side, it added.
Demand boosting measures such as direct income support to rural as well as urban poor, income tax reductions for the middle class, and temporary reductions in indirect taxes must be urgently considered, the survey suggested.
Further, it said that only 19 per cent of respondents were optimistic about better hiring prospects over the next two quarters.
Export prospects are also worsened noticeably in the current round with only 27 per cent of respondents indicating higher outbounds shipments.
Participants said that only a massive vaccination drive could decouple India''s economy from another pandemic-induced shock.
In addition, it said, the government must provide employment-based incentives to employers to avert any job losses and this could include temporary fiscal support towards payments of salary for employees in the MSME (Micro, Small & Medium Enterprises) sector and/ or exempt employers'' contribution to PF and ESI for the current fiscal year.
The survey was conducted during April-May and gauges the expectations of the respondents for April to September.