The second wave of the COVID-19 pandemic that hit India in April-May 2021 was extremely intense and impacted the functioning of businesses, which had just started to return to normalcy after the end. of the first wave. The rapid pace at which the virus has traveled across the country has resulted in a sudden increase in the total number of infections, with the number of daily new cases reaching new highs and putting enormous strain on the country’s health system. To break the chain of transmission, unlike last year when the country entered a nationwide lockdown, this time state governments have prioritized micro-containment zones and localized lockdowns as the situation evolves. in the field. If such measures were necessary, they had an impact on economic activities.
A nationwide business survey conducted by FICCI and Dhruva Advisors shows that 58% of businesses saw a âhigh impactâ on their businesses due to state-level lockdowns. 38% reported a “moderate impact” on their operations due to state level lockdowns. With different parts of the country subject to different sets of restrictions and consumer sentiment being affected due to the ferocity of the second wave, a noticeable drop in demand has been seen by businesses. 58% of companies surveyed said âweak demandâ was the biggest challenge they face in today’s environment. Next came âmanagement costsâ (56%) and âtight financial liquidityâ (43%) which emerged as other important issues facing companies in the current situation.
This time, it was not only demand in urban areas that was limited, but even rural areas saw demand squeeze with 37% of businesses reporting a âhigh impactâ on their sales in rural markets. Weak demand had an impact on capacity utilization, with 40% of companies recording utilization rates below 50% of their installed capacity.
While the impact of the second wave-induced closures on businesses is clearly visible, there is a silver lining on the horizon. This relates to expectations about how the business will perform over the next 6 to 12 months. With different states entering the âunlockedâ mode, there are immediate indications of improvement in economic activity. This trend is also reflected in companies’ expectations for capacity utilization over the next 6 to 12 months. The survey results show that nearly 63% of companies expect utilization rates above 70% in the next two to four quarters.
Commenting on the results of the investigation, Mr. Uday Shankar, President, FICCI said: âThe second wave of the COVID-19 pandemic has been particularly difficult. It has disrupted the normal functioning of businesses and the management of COVID has become a priority at the personal and institutional levels. With the number of new cases declining and states entering the âunlockâ mode, there is hope that business and economic activity would return to normal in the months to come. Even though we see signs of improvement, we need to prepare well for the following waves. Although the survey makes several suggestions, clearly âlarge-scale vaccinationâ must be the priority if we are to beat COVID-19 and put it behind us. A third wave with similar or higher intensity, as some experts predict, could reverse the gains seen in recent weeks. “
Mr. Dinesh Kanabar, CEO, Dhruva Advisors said: âThe survey reflects the impact of the second wave on the Indian economy and feelings for the future. Although there is an immediate effect on companies in terms of capacity utilization and demand, the industry is optimistic about the future and hopes for a better It is important to note that the government has high expectations of that we are well prepared for the next waves of COVID-19. “
Even as businesses prepare to improve, the need for government support remains high on their agenda. According to comments received in the survey, the MSME sector has been hit the hardest and there is an immediate need for assistance for this sector. This point of view was expressed by almost 65% of the companies questioned. Among other relief measures listed by companies, ease of compliance, moratorium on loan and interest payments and incentives to stimulate demand stand out. On the tax side, some of the key reforms companies want to see include lowering tax rates, reducing compliances, and speeding up refunds.
As the economic situation improves, it is essential that we do not lose sight of the health challenge for fear of being forced to revert to another foreclosure, which could once again wipe out the gains made. Members of Indian businesses believe we need to prepare well for the expected third wave of COVID-19 and build on lessons learned from our experience during the second wave.
The companies have defined a set of measures they believe the government needs to take to avoid the panic and stress that was created during the last wave. The top five priorities that should form the core of our preparatory work to deal with the following waves include  increase investment in health infrastructure in level 2 and level 3 cities and in rural areas;  maintain an adequate supply of essential drugs for the management of COVID-19;  continue the newly created temporary facilities for the management of COVID-19;  strengthen the testing infrastructure across the country; and  the establishment of a national vaccine manufacturing facility with government funding.
In addition to the above measures, the government should take all measures to intensify the vaccination campaign in the country. The only way to win the war against COVID-19 and put this behind us is mass vaccination. The importance given to vaccination by Indian companies can be measured by the fact that almost two-thirds of the companies surveyed have launched a vaccination campaign for their employees. As a result of these efforts, we find that in the case of almost 62% of companies up to 50% of staff is vaccinated with a dose and for 72% of companies up to a quarter of staff received at both dose it.
As vaccine supply improves in the country, central and state governments must work transparently to distribute vaccines throughout the country. According to the companies interviewed, the vaccination campaign in the country can be extended and made more effective by creating more stalls in public places, installing facilities in cooperative societies and encouraging partnerships with companies. Other suggestions include setting up vaccination facilities at airports, train stations, bus stations, schools and village panchayat ghars; the organization of mobile vans that can undertake vaccination in slums, rural areas and the planning of vaccination of elderly and disabled people with reduced mobility, at home.