A steady economic recovery on the anvil
India Inc is estimating a capacity utilisation of more than 50% in the second half of this financial year as the country emerges from COVID-19 lockdown, reported CII, citing CEOs of top 115 countries.
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, said CII reported on 3 Oct 2020.
The steady recovery based on businesses restarting as the government relaxes on the lockdown.
It is important to allow a complete opening up of the economy for demand to pick up which in turn will propel capacity utilization, said CII which has been working closely with states and city corporations to bring down uncertainty over the opening protocol.
The uptick in demand is expected to gain momentum in the coming weeks with the festive season around the corner.
Preparations are underway for Diwali, one of the biggest nation-wide festival when consumer demand is at peak. This year, Diwali in the north and Deepavali in south India falls on 14 November.
The CEOs met at CII’s National Council or its apex board, indicating the revival of positive business sentiment and gradual rise in expected corporate performance.
The CEOs who deliberated on a virtual platform included representatives across sectors from metals and mining to manufacturing, auto, pharma, health, energy, infrastructure, construction and leading services sector including ITES, health hospitality tourism and e-commerce. The apex body also had a large representation of the medium and small sectors apart from start-ups.
The unlocking of almost all economic activities along with the reform and revival measures announced by the Government and RBI have contributed to the gradual improvement in business sentiments in the second half of the current financial year.
While in most cases, the performance, revenue or capacity utilization, 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.
On consumer demand, while 32% of the CEOs are hoping for better prospects and another 27% of them expecting no change when compared to the second of last year.
However, only 31% of the CEOs expected their revenue growth to be in the positive territory in the second half of the current financial year compared to last year as far as revenue growth is concerned.
On exports, 40% of the CEOs expected better prospects on exports and 24% of then expect no change in prospects during the second half of the current year when compared to the same period last year.
Apart from the Agri-sector that has been in the positive territory, there are now clear indications of a smart recovery in some sectors like automobiles, FMCG, consumer durables and construction equipment.
The FMCG 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, etc. 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% by Q3. The Consumer Durables sector is witnessing strong demand, with double digits growth in August.
Washing machines, refrigerators, TVs especially large TVs, kitchen appliances, lighting, etc. 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.
Paper board and Packaging sector, which mirrors the aggregate demand in the economy is back to about 90% of pre-COVID levels. The retail is showing some interesting trends because even though footfalls have been low, the ticket size of purchases has gone up with the economy opening.
The Automotive sector too is seeing a demand pick up. The Two/Three/Four Wheelers are doing relatively better in August with the Four-wheeler segment witnessing a 15% growth in August.
Tractor sales in the month of August have been extremely good – the industry, which is a large contributor to the GDP, has been able makeup for lack of sales in April and May.
Most high-frequency data points have shown a continued normalisation in activity levels in September 2020. The most promising sign is the turn-around in outbound shipments for the first time in seven months with merchandise exports expanding by 5.3% in September as per the provisional official trade data.
In addition, weekly vehicle registrations continue to increase on a year-on-year basis in September, while the weekly CMIE unemployment rate has continued to decline and is now below the pre-lockdown levels. Google mobility indicators have also improved with a rise in workplace-related and grocery/pharmacy trips.
The news of the first advance estimates of Kharif crop topping a record 144.5 million tonnes has also brought much cheer.
The Governments both at the centre and State would need to focus on livelihoods in addition to lives and hence efforts need to be made to stall the practice of sudden and adhoc lockdowns announced by States as well as districts, according to CII.
These not only further disrupt the revival of economic activities but also do not yield the desired results on lives either, said CII. #manufacturing #construction #business #banking #projects /fiinews.com
