New Delhi: The first week of Unlock 1.0 beginning June 1 saw most firms resume business quickly with pent-up demand helping sales, though supply side constraints including labour shortages and inadequate credit held back a faster reopening, according to a quick survey by the Confederation of Indian Industry (CII) of 51 companies.
A majority of those surveyed across India indicated a rise of more than 25% in production compared with levels during the lockdown. The sales pickup has also been in the same range with 31% respondents indicating 25-50% rise from the lockdown.
Labour shortages, lack of public transport for workers, higher production and delivery costs and a liquidity crunch prevented a faster resumption of activity, the survey showed. The lockdown was imposed on March 25 and eased in stages from early May. Beginning June 1, the government had allowed most economic activities to resume barring a few. Businesses such as restaurants and malls were allowed to open a week later on June 8.
“Many enterprises are facing demand challenges, and firms in certain sectors in specific regions such as retail, tourism and hospitality continue to be under restrictions regarding opening up,” said CII director general Chandrajit Banerjee. “While usual capacity utilisation is yet some distance away depending on the health factors, we are hopeful that with supply chains functional, output will keep rising in coming months.”
Cos Seek Measures to Boost Demand
Businesses said pent-up demand from postponed consumption and inventory restocking are supporting economic activity, which may not last and sought measures that put more money in the hands of the consumers to boost demand. The survey findings were corroborated by the issuance of e-way bills, which added up to 8.72 million in the first week of June, higher than in the lockdown month of April but lower than the weekly average of 14 million in January. Eway bills are documents required under the GST regime to transport goods. The weekly average for May was 6.3 million.
Toll collections across national highways rose to 70-75% of average as on June 10, versus the week before where collections were about 60% of average, an official at National Highways Authority of India told ET. Average collection across national highways in India is Rs 85-90 crore per day. “Pent-up demand of some products is showing… We have to watch if the trend will continue,” a government official told ET. According to the CII survey, 41% of respondents reported a 25-50% rise in production from lockdown while 16% reported a 50-75% increase. Similarly, 31% of those surveyed indicated 25-50% higher sales compared with the lockdown period. In terms of overall demand, nearly 30% indicated a 25-50% rise in demand from lockdown.
Inter-state e-way bills rose to 3.16 million in the first week of June, which was more than the 2.1 million weekly average in May and higher than the weekly average of 600,000 in April, a month of full lockdown. “These numbers are expected to grow rapidly as trade and industry further picks up its business or production in the coming weeks or months, clearly signalling rise in economic activity,” said Tanushree Roy, director, GST, Nangia & Co LLP.
Supply constraints
The survey showed business activity suffered due to supply constraints with labour availability being a key bottleneck. “Availability of labour and behavioural changes toward discretionary spending amid economic uncertainty will drive the pace of activity across different parts of the economy in the ongoing month,” said Aditi Nayar, principal economist at ICRA. The businesses surveyed said banks were reluctant to issue new loans and automatic Covid credit without collateral was not available to all companies.
Source: indiatimes.com