Businesses continue to see improvement in performance: FICCI survey

The opening up of economy and implementation of a broad set of measures under 'Atmanirbhar Bharat' package have led to a continuous improvement, the survey said

The opening up of economy and implementation of a broad set of measures under 'Atmanirbhar Bharat' package have led to a continuous improvement over time in the performance of businesses, according to recent findings of the FICCI-Dhruva Advisors survey.

The prospect of an introduction of a vaccine for COVID-19 early next year has improved confidence level of businesses. Almost 74 per cent of the survey participants said they foresee a significant positive impact on their business once the vaccine is made available.

The COVID-19 induced travel restrictions limited the ability of companies to undertake business operations efficiently and 74 per cent of the survey participants validated this. To overcome this challenge and maintain business operations, companies leveraged digital tools for communication.

Given the benefits of use of technology, 64 per cent of the surveyed companies said moving forward they will use a mix of travel and virtual meetings even after the situation becomes normal.

Another major outcome of COVID-19 is a likely shift in global supply chains away from China to other economies. Nearly 70 per cent of the survey participants said India could benefit from this move and they expect a fair share of manufacturing to shift from China to India in the near future.

To capitalise on opportunities that could come India's way, there is need to strengthen India's manufacturing ecosystem. Under the 'Atmanirbhar Bharat' package, the government introduced several measures to address the immediate pain points of the economy as well as steps to improve India's manufacturing competitiveness.

These measures were well received by the industry with 45 per cent of companies rating them as 'good to excellent'.

The results of the December 2020 survey also indicate that there has been a further improvement in the performance of companies compared to the situation in August.

With improvement seen in the economy, nearly 40 per cent of the surveyed companies are currently operating at a capacity utilisation level of over 70 per cent vis-a-vis 30 per cent of companies in August.

Other indicators of improving business performance in the December survey are related to order books and exports. Nearly 50 per cent of companies reported that they have seen an increase in their order books and about 40 per cent said their exports have increased.

In the August survey, the corresponding figures were 44 per cent and 30 per cent respectively.

Even as there are signs of improvement in performance of businesses, the impact of COVID-19 still lingers. Survey results show that businesses continue to face challenges on account of weak demand (59 per cent), managing costs (54 per cent) and financial liquidity (48 per cent).

Given this, survey participants expect both government and RBI to continue with their support measures even next year. There is a strong demand that the upcoming budget must prioritise growth-oriented measures, including a cut in direct tax rates.

"The results of the survey are encouraging and highlight the ongoing industrial and economic recovery. This momentum needs to be built upon and now all eyes are on the upcoming Budget," said FICCI President Uday Shankar.

Dinesh Kanabar, CEO of Dhruva Advisors LLP, said the government should now focus on building a robust manufacturing ecosystem to leverage on the opportunity of making India a global manufacturing hub.