COVID-19 impact on industry to last beyond June: ASSOCHAM survey

78 per cent of respondents felt business revenue impact would extend past Q1 FY20


The economic stress on Indian industry arising out of the nationwide lockdown forced by the COVID-19 health emergency is expected to last well beyond one quarter, according the respondents of an ASSOCHAM-Primus Partners' joint survey.

The report on the survey findings also highlighted that companies are planning deferment or cancellation of investment plans and that more employers prefer to retain manpower than those seeking to reduce the head-count.

The ASSOCHAM-Primus Partners Survey was conducted across different sectors, including manufacturing, infrastructure and services with a sample size of 3,552, encompassing all segments of the industry—small, medium and large.

As many as 79 per cent of the respondents pointed towards the economic impact of the COVID-19 extending beyond a single quarter with the lockdown resulting in breakdown in the supply chain—from raw material to intermediates to finished goods and transportation to the consumer destination.

''While we expect major easing of lockdown after May 3, even if some states continue with stringent restrictions, the industry faces a long haul of challenges till the world finds a medical solution to the Coronavirus pandemic. Hopefully, India remains among those least affected, aided by several factors like young population, ramp-up in health infrastructure, aided by nation-wide lockdown, though at a huge economic cost," said ASSOCHAM Secretary General Mr Deepak Sood.

He said, "it goes to the credit of both employers and employees that we have so far avoided displacement of workforce. Companies are resorting to pragmatic solutions like reducing manpower costs and retaining the head count, while employees are responding well to the fast developing situation being among the most important business stakeholders''.

The ASSOCHAM-Primus Partners' joint survey found that the biggest worry, as noted by 33 per cent of respondents, arose from the lack of working capital while payment of salaries with output loss and without cash realisation was the second biggest pressure point for the industry (27 per cent).

When it comes to business revenue, over 78 per cent of the respondents said the impact in the April-June quarter would be the maximum, while it would stretch to the subsequent quarter as well.

As for manpower, the survey noted that most of the participants (36 per cent) said there would be no change in the head count since the companies would like to retain human resources for re-opening of the economy. However, as many as 26 per cent of the respondents did feel there could be reduction in manpower even beyond 20 per cent of the payroll because of the on-going crisis.

While over 37 per cent of those surveyed said they were taking up cost containment initiatives, close to 29 per cent said they plan to defer or cancel their investment plans. A good number of them are resorting to change in financing plans, while the mergers and acquisitions, and remain on low key for now.

There emerged a mixed picture on the effectiveness of the government measures announced so far. While 34 per cent the measures were "somewhat effective", another 27 per cent noted ''no effect".

Key challenges included lack of raw material, productivity loss, insufficient staffing to carry out critical work and limited operations due to transport operations.

A survey by FICCI found that most industry respondents did not foresee positive demand account during the entire fiscal year, with 69 per cent of respondents feeling additional stimulus measures would be required from the government.