More than half of business leaders surveyed in a recent report expect the second wave of coronavirus cases to affect their businesses for a quarter, whereas a little less than one-fourth expect the repercussions to remain for 6-12 months.
Despite an improvement in overall business sentiment during the March quarter, business leaders remained apprehensive of the state of their ventures as the second wave of coronavirus cases sweeps the nation, showed the Business Today-C fore Business Confidence Index (BCI).
BCI, which measures overall confidence level of business leaders in the March quarter, jumped to 45.5 per cent in the March quarter after slipping to a record low of 43.8 per cent in the December quarter. It was 48.2 per cent in the September quarter.
The latest spike in BCI could be attributed to the successive improvement in economic growth over the past year, says Aroon Purie, Chairman and Editor-in-Chief, India Today Group. "The growth estimates for FY22 show sharp economic recovery as well, but the pandemic overhang can alter these projections and delay the march towards pre-Covid normal," he adds.
The survey showed deterioration in business leaders' outlook for the June quarter of the current fiscal. In four out of five parameters - economic prospects of the business, overall economic situation, demand conditions, and profits - respondents gave lower ratings than the previous survey. The only silver lining was hiring conditions, which saw no change in outlook (at 4.1 on a scale of 10).
The survey showed that 57 per cent respondents expect the second wave of COVID-19 to affect their businesses for a quarter. Another 22 per cent expect the pandemic's effect to last 6-12 months. The concerns around the latest surge in COVID-19 cases are stem largely from fears that it will undo some of the economic gains of the past few quarters.
The survey also shows that 64 per cent of business leaders expect non-performing assets (NPAs) to rise after the Supreme Court refused to extend RBI's loan moratorium and interest waiver announced last year.
Around 62 per cent respondents said they don't plan to make fresh investments in the next six months, while 58 per cent expect overall demand to drop substantially over the next three months.
Contrary to the survey findings, some economists believe that both urban and rural demand is looking up. The optimism comes on the back of expectations that rural demand is likely to get a boost from the good rabi crop and additional allocation of Rs 40,000 crore towards the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in the stimulus package last year.
Also, the fact that Goods and Service Tax (GST) collection touched an all-time high of Rs 1.24 lakh crore in March 2021 is being perceived as an improvement in consumption, despite the fact that the bulk of rise in GST mop-up is being attributed to better compliance due to the nationwide raids conducted by tax authorities.
(Edited by Vivek Punj)