Following a 23.9% contraction in GDP in the first quarter of FY21, industry has urged “bold and decisive” action from the government to stimulate demand for India to return to a positive growth trajectory, the findings of a survey show.
Conducted in August and covering 166 firms, the survey by FICCI and Dhruva Advisors said weak demand continued to remain the key bottleneck as almost 68% have reported this as their biggest challenge; 41% have said sales in August were less than 50% from a year earlier. Another 21%, reported sales between 50%-75% of the August 2019 figures.
“Reviving the economy requires sustained effort, especially when, in the first quarter, our GDP suffered a major blow,” said Sangita Reddy, president, FICCI.
“In the absence of a major fiscal push on the demand side, we could end up being stuck in a quagmire of a low demand and low-income cycle. If we have to return to the positive growth trajectory, the time for bold and decisive action is now.”
The sharp GDP contraction was a matter of great concern and clearly underlined the need for a major stimulus to energise and strengthen demand in the economy, said FICCI. In June, only 25% of firms had reported that unlocking of the economy had a positive impact on their order books, while in August, 44% reported an improvement post opening up of the economy.
Survey participants also suggested measures on supporting demand, including additional cash transfers to migrant workers, the poor and farmers; temporary cut in GST rates; increase in government procurement; front-ending infrastructure projects and part funding of wages as had been done in other nations to ensure employment was sustained.
Additionally, the Central government must come out with a uniform policy for entry of tourists across different States as movement of people will oil the growth of the domestic/regional economies. “When asked for their views on the localised lockdowns across states, 84% of the surveyed companies reported that there was a ‘moderate to high impact’ on their operations on account of localised lockdowns.”
Further, the respondents said that the government-backed Emergency Credit Line Guarantee Scheme (ECLGS) has been a key driver of credit growth during this challenging period. About 40% of the surveyed companies said it was effective and helped them deal with hardships due to COVID-19, as against nearly 20% companies in June 2020.
Besides, 67% of respondents said the one-time loan restructuring scheme announced by the Reserve Bank of India will have a beneficial impact on businesses.