Business activities significantly hit; recovery may take more than a year: CII CEOs Snap Poll

CHANDIGARH,03.04.20-The country-wide lockdown imposed on 23rd March, while necessary, has had deep ramifications on economic activity. According to the CII CEOs Snap Poll on Impact of COVID-19 on Economy and Industry, while a majority of the firms continue to anticipate a significant decline in their topline, they now foresee a delay in economic revival and demand recovery. The survey saw the participation of more than 300 CEOs, of which nearly two-thirds belonged to MSMEs.

The lockdown brought economic activity to a grinding halt and the survey findings indicate that a significant majority of the firms (65%) expect revenues to fall more than 40% in the current quarter (Apr-Jun 2020). For financial year 2020-21, the expectations of a fall in revenue are staggered, with 33% of the firms anticipating a revenue fall of more than 40%, closely followed by 32% of firms expecting a revenue contraction ranging between 20% to 40%.

While three out of four firms have identified that a ‘Complete shutdown of operations’ was a major constraint being faced by business, more than half of them have also indicated ‘Lack of demand for products’ as a hinderance to business activity.

Further, the survey results reveal that we may experience a protracted slowdown in economic activity as a major proportion of the respondents (45%) feel it will take more than a year to achieve economic normalcy once the lockdown ends. With respect to their own companies, however, the respondents anticipate a slightly quicker recovery, i.e. within 6-12 months with 34% of the respondents indicating the same. Further, a major proportion of the respondents anticipate normalcy in domestic demand conditions within 6-12 months, post lockdown. Additionally, it is pertinent to note that according to a large proportion of the firms, a recovery in domestic demand, for their product or services, may precede the recovery in foreign demand for the same.

On the jobs and livelihoods front, more than half of the firms (54%) foresee job losses in their respective sectors after the lockdown ends. A major share of respondents (45%) expect 15% to 30% cut in jobs. However, allaying some concerns, nearly two-thirds of the respondents reported that they have not experienced a salary/ wage cut in their firms so far. Among those who have witnessed a wage cut, the duration of the same is ‘Undecided’ for a majority.

Taking cognizance of the deteriorating industry expectations, Mr Chandrajit Banerjee, Director General, CII said “While the lockdown was necessary to mitigate the impact coronavirus on the population, its 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.”

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Allow Greater Industrial Activities in Major Economic Districts: CII

The Confederation of Indian Industry (CII) called for economic contribution of districts to be taken into consideration while classifying Lockdown Zones. Districts with high economic activity should resume all industrial and business operations, including in Containment Zones with highest safety protocols, said CII in its report ‘A Strategy Note on Resumption of Economic Activities in Industrial Areas’ submitted to the Government. The submission follows the notification issued on 1 May by the Government on graded exit from the Covid-19 related lockdown.

“The third phase of lockdown necessitates a focused strategy to minimize economic contraction due to Covid-19, without compromising on efforts to control the contagion. Prioritizing 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,” stated Mr Chandrajit Banerjee, Director General, CII.

While the protracted lockdown in the country, necessitated by the rapid spread of COVID-19, has helped in controlling the spread of epidemic and given us time to augment medical capacity, it has also caused enormous stress to the financial sustainability of many businesses, said CII in a press statement.

In its strategy note, CII requested that the top districts should be identified based on variables like their contribution to country’s GDP, or presence of industrial estates & clusters or registration of enterprises in a district.

Instead of the current practice of classifying the entire district as a Red zone, CII has suggested 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, said CII. CII has suggested that close surrounding areas can be classified as Orange Zones where industrial activity can be continued with strict precautionary measures and monitoring. The distinction of essential and non-essential items should be removed and all factories should be permitted to restart, according to CII.

In containment zones, industrial units where no positive cases exist, can be allowed to operate if workers can be restricted to the premises or within walkable distance, as per the CII note. Raw materials and finished goods should be disinfected and kept separately for 72 hours before use as permissible by health authorities.

Maximum precautions and safety measures in the form of masks, repeated sanitation, restricted movement of people and vehicles and group testing, among others, can be carried out regularly in such Containment Zones, noted CII.

“Aggressive measures are required to ensure that an industrial district moves from Red to Orange and Green within 21 days. The cost of undertaking precautionary measures by way of repeated sanitation, wearing of PPE, Masks, monitoring, group testing etc. will be much less than the economic loss if businesses in such high performing districts have to remain shut for longer duration,” stated Mr Banerjee.

The Government notification of 1 May has permitted industrial estates, SEZ and industrial townships with restricted entry within urban areas of Red Zones to commence operations. CII submitted that all industrial units, including in non-notified industrial areas and standalone units, be allowed to function in urban areas. These should include non-essential goods and services as well.

CII also called for limited public transport to function to enable workers and self-employed people to reach the industrial areas.

Green zones within an industrial district, on other hand, should be allowed to work with relaxed restrictions but following strictly the health & safety protocols prescribed by the health authorities.

There should be a real time availability of data on all types of zones within the industrial districts. The authorities may also provide updated information on Aarogya Setu app, other apps, local newspapers, radio, TV and online channels, stated CII.

The CII strategy note prescribes standard operating procedures for offices, workplaces, factories and establishments prior to resuming operations, after resuming operations, and guidelines for social distancing and visitor management.