Covid-19: Massive job, revenue loss lies ahead, says CII survey of CEOs

As the Covid-19 pandemic continues to batter the economy, two-thirds of businesses expect revenues to fall by more than 40 per cent in the April-June quarter of FY21, while only 15 per cent of companies expect to see revenue growth in the current financial year, a snap poll by the Confederation of Indian Industry (CII) shows.
 

Based on the responses of more than 300 chief executive officers (CEO) across industries, the survey shows that a broad cross-section of firms foresee a delay in economic revival and demand recovery. As a result, more than half of participating CEOs anticipate job losses in their respective sectors, post lockdown, with a major proportion of them expecting up to 15-30 per cent cut in payrolls.
 

For FY21, the expectations of a fall in revenue are staggered, with 33 per cent of the firms anticipating a revenue fall of more than 40 per cent, closely followed by 32 per cent of firms expecting a revenue contraction in the range of 20-40 per cent.

“These aren’t normal figures. Every business operates with a contingency plan, but what we are hearing from our members is that the majority are just grappling with the crisis using all possible resources. This is unsustainable,” said a senior CII functionary.

Conducted on May 1, the survey showed three out of four firms identified the complete shutdown of operations as a major constraint while more than half of firms pointed to the lack of demand for products. This dwindling demand may lead to a protracted slowdown in economic activity, which may take more than a year post lockdown to normalise, according to 45 per cent of respondents. With respect to their own companies, however, the respondents anticipate a slightly quicker recovery, i.e. within 6-12 months with 34 per cent of the respondents indicating the same.

 

On the jobs and livelihoods front, more than half of the firms foresee job losses in their sectors after the lockdown ends. However, allaying some concerns, nearly two-thirds of the respondents said they have not experienced a salary wage cut in their firms so far. But among those who have seen a cut in pay, the majority reported that they didn't know when salaries would get back to normal.
 

Fresh stimulus demand
 

The CII has again stressed their demand for a detailed stimulus package for the industry. “While the lockdown was necessary to mitigate the impact of coronavirus on the population, it has had dire implications for economic activity. At this hour, the industry awaits a stimulus package for economic revival and livelihood sustenance besides calibrated exit from lockdown,” said Chandrajit Banerjee, director-general of CII.
 

Exit strategy
 

He also backed a more focused approach for exiting the lockdown. “Prioritising districts with heavy presence of economic and industrial activities with continued operations accompanied by strictest precautions can help enterprises to remain financially sustainable while averting job losses,” said Banerjee.
 

The CII also requested that the top districts should be identified based on variables like their contribution to GDP, or presence of industrial estates & clusters or registration of enterprises in a district. Instead of the practice of classifying the entire district as a red zone, the chamber has backed the need for classifying zones as containment, orange and green within an industrial district.

“Economic activities, in varying degrees of relaxation, should be permitted in all areas of this district but health and safety protocols would differ from zone to zone. The containment zone may be a street, mohalla or factory building where positive cases have been detected. The distinction of essential and non-essential items should be removed and all factories should be permitted to restart,” the report said.
 

The chamber has also backed the argument that even inside containment zones, units where no positive cases exist can be allowed to operate if workers can be restricted to the premises.
 

Raw materials and finished goods should be disinfected and kept idle for 72 hours before use, it has suggested, apart from real time availability of data on all types of zones within the industrial districts.