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BusinessCEOs indicate business sentiment revival

CEOs indicate business sentiment revival

Published: 4th Oct 2020 10:52 pm

New Delhi: The CEOs of top 115 companies who met at CII’s National Council earlier this week indicated revival of business sentiment and a gradual rise in expected corporate performance in a poll, raising hopes that a steady recovery of India’s economy is on the anvil.

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The CEOs, who took the poll, included representatives from across sectors like metals and mining, manufacturing, auto, pharma, health, energy, infrastructure, construction and leading services sector including ITES, health hospitality tourism and e-commerce, the Confederation of Indian Industry (CII) said on Sunday.

“A steady recovery of the Indian economy is on the anvil as corporate India restarts business and economic activity with lockdowns being increasingly relaxed in many parts of the country,” the chamber said. India Inc is now estimating a capacity utilisation of more than 50 per cent in the second half of this financial year, it added.

However, according to CII, governments both at the Centre and States would need to focus on livelihoods in addition to lives, and hence efforts need to be made to stall the practice of sudden and ad-hoc lockdowns announced by states as well as districts. The lockdowns not only further disrupt the revival of economic activities but also do not yield the desired results on lives either.

“It is important to allow a complete opening up of the economy for demand to pick up which in turn will propel capacity utilisation,” CII said, adding that the uptick in demand is expected to gain momentum in the coming weeks with the festive season round the corner. The unlocking of most economic activities along with the reform and revival measures announced by the Centre and RBI have contributed to the gradual improvement in business sentiments in the second half of the current financial year, the chamber said.

“While in most cases, the performance – revenue or capacity utilisation – is estimated to be lower than the comparative figures in 2019-20, a large percentage of the CEOs polled have shown confidence in the days ahead indicating that the worst may be behind,” CII said.

On consumer demand, 32 per cent of the CEOs are hoping for better prospects, while another 27 per cent of them expect no change when compared to the second half of last year, CII said. However, only 31 per cent of the CEOs expect their revenue growth to be in positive territory in the second half of the current financial year as compared to last year.

About 40 per cent of CEOs expect better prospects on exports, while 24 per cent of them expect no change in the prospects during the second half of the current year as compared to the same period last year. Apart from the agri-sector, which has been in positive territory, there are now clear indications of a smart recovery in some sectors like automobile, FMCG, consumer durables and construction equipment, CII said.

According to the chamber, the FMCG (fast-moving consumer goods) sector has been sequentially improving with each month, looking better than the previous month and demand in semi-urban and small towns is estimated to be back at pre-COVID levels, except in urban areas like Mumbai, Pune, Chennai, among others, where it is still picking up. A similar story is playing out in the consumer durables sector where demand is expected to grow by 20 per cent by Q3, it said.
The consumer durables sector is witnessing strong demand, with double-digit growth in August. Washing machines, refrigerators, TVs, especially large TVs, kitchen appliances, lighting, among others, are all doing well. However, supply side constraints may create challenges in meeting this demand if there are restrictions imposed on movement of goods and services, CII said, adding that the automotive sector is also seeing demand pick up.

India’s recovery gains momentum on economic package: DEA

New Delhi: The economic recovery of India has gained momentum due to the “Aatmanirbhar Bharat” economic package announced in May, said a report by the Department of Economic Affairs (DEA). The ‘Monthly Economic Review’ for September 2020 cited the estimated growth in the Kharif foodgrain output for 2020-21 to show a recovering economy.

“The implementation of Aatmanirbhar Bharat (AB) package and unlocking of the economy have ensured that economic recovery in India has gained momentum. This is seen in agriculture with production of kharif foodgrains in 2020-21 estimated to go past the previous year’s level,” it said.

It noted that the growth of demand in the rural sector is reflected in registration of two wheelers, three wheelers and passenger vehicles along with tractor sales reaching or surpassing previous year levels in August. Automobile sales largely recorded improvement last month compared to September 2019, a major reason being the low base — low sales during the year ago. The report also said that other high-frequency indicators have also improved in sync with global activity. Increase in global demand has led to expansion of India’s export at 5.3 per cent in September on YoY basis, it added.

The recovery in rail freight enabled revenue earnings clocking positive year-on-year growth for the first time since March in the months of August and early September. The DEA report said that easing of inter-state movement restrictions, quarantine policy and unlocking were accompanied with recovery in rail passenger earnings as well.

Biz optimism returning: Axis Bank MD

Mumbai: Axis Bank’s chief executive and managing director Amitabh Chaudhry feels the economic recovery will be slow, but there is optimism coming in from improved loan demand and credit card spends for the third largest private sector lender. He, however, sounded sceptical on whether the government can come out with more stimulus measures, and said that the economic recovery will be a slow “L-shaped” one.

It can be noted that the country’s GDP contracted by nearly a fourth in the June quarter and everybody is watching for signs of revival. Some analysts feel the encouraging data for the last month can be a sign of pent-up demand. “My assessment is that the macro situation has improved quite a bit, especially in the last month or so. I’m seeing a clear return of optimism and this is evident when I converse with CEOs of various organisations and when I see our own new loan enquiries, credit card spends and account openings,” Chaudhry said. He was quick to add that we are not completely out of the woods yet and a sustained recovery may take a few quarters.

Over the recovery trajectory, Chaudhry said it will be “L-shaped” recovery which is characterised by a slow rate of recovery with persistent unemployment and stagnant economic growth, as per many economists. “It will be more like a L-shaped recovery where the pick-up will be slow and gradual. It will take a lot of time. Somewhere the confidence of the customer has been shaken, it will take time to come back,” he said. The spread of the Covid-19 infections in rural areas means that the hopes of revival in the hinterland will be “subdued” and this is a matter of concern, he said.

The government should desist from localised lockdowns for the short term, he said, adding that such measures hurt the ability to plan. When asked if he expects the government to come out with a second stimulus package ahead of the festivities, Chaudhry sounded a bit sceptical and advocated everybody to be “realist”. “The government has said that they might infuse more into the economy. I am quite doubtful that we should expect significant coming through for the festive season,” he said. “Somewhere you’ve to be a realist and frankly just do what we have to do and get the business back rather than waiting for further handouts from the government,” he said.

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