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Unlocking of economy - 30% firms operating at 70% capacity utilisation: Survey

By TIOL News Service

NEW DELHI, JULY 06, 2020: AFTER the lockdown, the Indian economy is now gradually opening up. With ‘Unlock 1.0’ being announced by the government, we are seeing a phased resumption of economic activities with businesses across sectors coming back on stream. The opening up of the economy is also accompanied by implementation of a series of measures that were announced earlier as part of the economic package by the Finance Minister.

Both these measures - the opening up of the economy and implementation of the economic package – have started showing results on the ground and initial signs of improvement in the performance of businesses are now visible. Results of a survey conducted jointly by FICCI and Dhruva Advisors highlight this trend. While the green shoots of recovery are being seen, it is important to emphasise that sustaining this improvement in the operational parameters of businesses will require continuous support from the government. The support is particularly needed in the realm of strengthening market demand in the absence of which this initial recovery may fizzle out.

The FICCI-Dhruva Advisors industry survey was conducted in the month of June 2020 and saw participation of over 100 CxOs from across sectors.

The results of the survey show that while currently close to 30% of the firms are operating at 70% plus capacity utilisation, nearly 45% of the firms expect capacity utilisation to be above 70% in the near term.

Unlocking of the economy is starting to have a positive impact on exports, cash flows, order books and supply chains. 22% of the respondents have said that exports have improved in recent times. 25% have reported a positive impact of unlocking of the economy on order books and 21% have confirmed improvement in cash flows. Nearly 30% of the firms are seeing their supply chains getting back on track.

As a reference, it may also be noted that in the April edition of this survey only 5% of the companies were expecting an increase in exports, 7% had reported increase in order books and 10% expected an improvement in cash flows.

Commenting on the results of the survey Dr Sangita Reddy, President, FICCI said, “These numbers are on expected lines and underscore the nascent recovery that is currently underway. Given the deep impact on the economy and industry, any improvement will be gradual and with time we hope to see these results improving. Given the evolving situation, it is important that we continue to take measures that are supportive of businesses enabling them to tide over the current crisis as well as prepare well for the long-term opportunities.”