NEW DELHI: A prolonged shutdown and skyrocketing job losses due to the COVID-19 pandemic have taken their toll on India’s health, economy and corporate profits.
According to a snap CEOs survey conducted by the Confederation of Indian Industry (CII), a majority of the 200 plus executives surveyed expect India Inc’s revenues to fall more than 10 per cent and net profits to decline more than five per cent in the current quarter (April-Jun 2020) as well as the preceding quarter (January-March 2020) leading to massive job losses.
The manufacturing sector faces a dual challenge. While the nationwide lockdown has allowed manufacturing for essential goods, the absence of raw materials can create end-product shortages. On the demand side, more than 40 per cent of the firms expect their stocks to last beyond a month once the lockdown ends — indicating expectations of a demand slowdown in the post lockdown period, the survey noted.
Most firms (80 per cent) have also claimed that their inventory is lying idle and, depending on how long the virus proliferates, expect the economic impact to become more severe. Industries such as consumer durable goods and automobiles are expected to be severely impacted, with the impact cascading to other intermediate and basic goods segments.
The surveyed chief executives also say that access to manpower and movement of products have emerged as major constraints in essentials trade across the board. This could result in direct layoffs or major salary cuts given that industries like airlines, hotels, malls, restaurants, theatres etc. cannot pay staff when there is zero income.
About 52 per cent of the companies surveyed foresee job losses in their respective sectors, with 47 per cent of these expecting a job cut of less than 15 per cent and 32 per cent expecting to shed 15-30 per cent once the lockdown ends.
Economists have already warned that the revenue losses will mean a sharp decline in GDP. “At a very broad level, a single day of a complete shutdown... involves around Rs 50,000 crore of real GDP. A 10-day shut down, for instance, would be Rs 5 lakh crore or 3.4 per cent of GDP,” explained Madan Sabnavis, chief economist, CARE Ratings.
According to Chandrajit Banerjee, Director-General, CII: “The government could announce a fiscal stimulus package for the industry and implement it on fast track mode, given that the sudden imposition of the lockdown has significantly impacted industry operations and the uncertainty of a recovery threatens substantial loss of livelihoods going forward.”