Companies fear decline in economy, loss of employment

In a snap poll conducted by the Confederation of Indian Industry (CII), which saw participation of close to 200 CEOs from different sectors, loss of employment and decline in economy are said to be the major fear factor for most of the companies.

14 Apr 2020 | By Aultrin Vijay

As many as 200 CEOs participated in the electronic survey conducted by CII

The Covid-19 pandemic is causing a significant impact on individual lives, businesses, and the economy. The Indian economy was already witnessing a slowdown in the last few quarters and the current pandemic will make the recovery even more difficult.

Though the supply and distribution of essential products and services are exempted from the lockdown, it is the most vulnerable sections of the society that are bearing the brunt of this, CII mentioned in its report.

According to an electronic survey conducted by the Confederation of Indian Industry (CII) titled 'CEOs Snap Poll on Impact of Covid-19 Lockdown on Industry’, the global Covid-19 pandemic and the subsequent lockdown measure undertaken across states have significantly impacted the domestic economy. CII had invited close to 200 CEOs from different sectors to participate in the survey.

Close to 75% of the respondents expected revenues to fall more than 10% in Q4, FY20. As far as the bottom-line is concerned, close to 67% of the respondents expect the bottom-line (or net profit) to decline more than 5%. "The expectations of the sharp decline in revenue and net profit are indicators of the impact that this outbreak has on the domestic companies and overall GDP growth," the report stated.

Along with a decline in an economy, comes subsequent loss of employment. In wake of the Covid-19 pandemic, approximately 52% of the firms foresee job losses in their respective sectors post lockdown. According to the CII survey, around 46% of the respondents believe that the pandemic will have no major impact on the job market and therefore no expectations of job loss. Majority of the firms expect less than 15% job loss whereas 32% expect job losses to be in the 15~30% range. The repercussions on the job market will only be evident once the lockdown ends, it stated.

The complete lockdown has brought most businesses to a standstill, wherein their inventory is not going out in the market. More than 80% of the firms from the CII survey claimed that their inventory was currently lying idle and 64% believe that the inventory will be cleared in less than 30 days. Close to 36% of the respondents expect a demand slowdown in the post lockdown period.

Though the Central Government has allowed transportation and distribution of essential services during the lockdown, many issues had to be fixed to ensure smooth inter-state transportation. Most of the firms engaged in the production of essential products and supply of ancillary goods faced issues such as constrained operations in production and supply of those goods, access to manpower, and movement and distribution of products.

Apart from the national lockdown to curb the contagion, the Government announced a relief package of Rs 1.70 lakh crore to provide a safety net for those hit hardest by the lockdown.

CII suggested that the implementation of the fiscal stimulus package should be done in a fast track mode as the sudden imposition of the lockdown has significantly impacted industry operations and uncertainty of a recovery threatens a substantial loss of livelihoods going forward.

CII proposes calibrated, safe exit from lockdown

The Confederation of Indian Industry (CII) has suggested a slow and staggered approach to various sectors based on geographical spread of Covid-19 in the country. This is an evolving situation and therefore, we should be open to alter our approach as we go along, said CII in a press release while commenting on the plans of a calibrated opening up.

“Given that the number of cases has rapidly increased and hotspots have emerged in the country over the last few days, and that the opening up across the country would need to be slow and staggered, it would be desirable to have three classifications of geographies as red, amber and green, based on the incidence of Covid-19 cases. The principle should be that we look at opening up in concentric circles around the red zones. The radiating heat map should turn from red in the inside to green on the outside. In other words, “Lock inside out” said Chandrajit Banerjee, director general, CII.

A more complex point is whether all industries can open in the green zones and which ones should open in the amber zone, assuming that none would be operational in the red zones other than essential and exempt services.

The point to stress is that all facilities that reopen must have requisite health, sanitation and screening systems in place to protect workers. Various measures have been suggested such as thermal check, social distancing, factory sanitisation and so on. Any enterprise which does not comply with this on a self-certification basis should be subject to stringent penalties, the CII release said. 

However, prior to the lifting of the lockdown, there has to be adequate notice given to all and along with that there should be announcement of an economic package, CII has said.