There is a sharp deterioration in the optimism level of corporate India, with companies feeling the need for another fiscal package, on the back of a sweeping second wave of the Coronavirus infection, says the country’s leading trade body, Federation of Indian Chambers of Commerce & Industry (FICCI).

Outlook on employment and exports also reported a discernible deterioration, revealed the latest round of FICCI’s Business Confidence Survey conducted in April/May 2021.

The survey gauged expectations of the respondents, belonging to a wide array of sectors, for the period April to September 2021.

The overall business confidence Index plunged to 51.5 in the current round after reporting a decadal high value of 74.2 in the previous survey round conducted earlier this year before the second wave of the pandemic hit the country.

However, the Overall business confidence index in the latest round of the survey was higher than the value of 42.9 – the lowest ever - registered a year back, a FICC media release said.

“On the fiscal side, companies unanimously felt the need for another fiscal package, focusing majorly on addressing the demand side. 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 FICCI said.

The survey highlighted the need for continuation of liquidity support and credit enhancement measures to MSMEs, and called for targeted fiscal support through tax waiver and financial assistance to sectors that were previously kept out of the stimulus package (announced last fiscal) but were deeply impacted by the Covid pandemic like travel, tourism, hotels, hospitality and civil aviation.

It also demanded the government provide employment-based incentives to employers to avert any job losses.

The majority of the participating companies called for extension of the moratorium on loans, principal and interest payments, for at least another six months, and emphasized on the need for a stable interest rate regime for about 12-18 months.

The survey noted muted expectations about the near-term prospects with 70 percent of the participants reporting weak demand conditions as a bothering factor, as against 56 percent stating the same in the previous round. 

The corresponding year-ago figure last year was 77 percent.

“In the current survey, the proportion of respondents anticipating better sales prospects in the near term declined significantly to 31 percent versus 66 percent respondents stating likewise in the previous round,” it said.

The participating companies, however, did report improved capacity utilization rate in the present survey despite weak demand conditions, due to imposition of localised restrictions instead of a complete lockdown, which ensured industry remaining largely functional throughout.

Furthermore, participants in the survey cited increasing raw material costs as bothersome.

(SAM)