58% of business activities impacted by COVID second wave, FICCI

About 58% of respondents cited weak demand as a major challenge in the current environment, the survey conducted by Federation of Indian Chambers of Commerce and Industry (Ficci) and Dhruva Advisors showed. It also believes the country must prepare for subsequent waves and that mass vaccination is the only lasting solution to the Covid crisis.

According to the study, more than half of the respondents, around 58%, reported weak demand, 56% were ‘managing costs’, while 43% said ‘tight financial liquidity’ was a major issue while running operations. Businesses, which had just started moving back to normalcy after the end of the first wave, were hit hard by the second wave.

The swift pace at which the virus travelled across the country led to a sudden jump in the overall infections, with the daily caseload touching new highs and putting enormous pressure on the country’s healthcare system, the survey said.

To break the chain of transmission, unlike last year when the country went into a national lockdown, this time state governments prioritised micro-containment zones and localised lockdowns based on the evolving situation on the ground. While such measures were necessary, these did have an impact on economic activities.

This time, it was not just demand in urban areas that was constrained, but even rural areas saw a compression in demand with 37% of companies reporting a ‘high impact’ on their sales in rural markets.

The weak demand situation impacted capacity utilisation with 40% of companies seeing utilisation rates of less than 50 per cent of their installed capacity.

With different states getting into the ‘unlock’ mode, there are immediate indications of improvement in economic activity. This trend is also reflected in the expectations companies have regarding capacity utilisation over the next 6-12 months. Survey results show that nearly 63% of companies foresee utilisation rates to be over 70% in the next two to four quarters.