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After a minor jump in the previous quarter, business confidence stays on a downward slope as the second wave of the pandemic hits businesses, finds the latest Business Today’s Business Confidence Index

Covid-19 has hit the country’s economy hard. According to provisional data released by the National Statistical Office, India’s gross domestic product (GDP) contracted 7.3 per cent in FY21, the biggest dip since 1947. The second wave of the pandemic has affected all segments of the economy. As a result, corporate sentiment took a beating in the June quarter. On a scale of 100, Business Today’s Business Confidence Index (BCI) fell to 43.2 in the June quarter, against 45.5 in the previous quarter and 43.8 in the quarter before that. Market research agency C fore quizzed 500 CEOs and chief financial officers across 12 cities for the survey.

Economists say the dip is on expected lines. “This (survey) pertains to the quarter in which the second Covid wave impacted two months significantly. Many sectors of the economy are almost at standstill as far as demand is concerned. The confidence will remain low. It will show tangible recovery from the third quarter,” says D. K. Srivastava, Chief Policy Advisor, EY.

The latest survey shows deterioration on all five parameters — overall economic conditions, financial situation, demand conditions, profit margins and hiring conditions. Take financial situation. The respondents have given a rating of 4.1 (on a scale of 1 to 10), compared with 5.1 in the previous survey. Demand conditions have been rated 4, against 5.2 in the previous survey.

Around the time the survey was commissioned, which was in the second last week of June, it seemed the government was aware of the dire situation

of India Inc. On June 28, Finance Minister Nirmala Sitharaman announced a package worth ` 6.28 lakh crore for sectors such as healthcare, infrastructure, agriculture, exports and tourism. As many as 88 per cent corporate leaders who responded to the survey had wanted the government to come out with a stimulus package right away.

The survey also shows that nearly 32 per cent respondents expect the government to go for direct cash transfers, while another 26 per cent believe that boosting public expenditure can revive economic growth. Just 18 per cent think a stimulus for the private sector can bring the economy back on track.

Since the beginning of the pandemic, countries such as the US and the UK have been sending out cheques to their citizens. But the situation in India is different.

“India already has a public finance problem. It cannot afford to pay money to everybody,” says U.R. Bhat, Director at Dalton Capital Advisors, adding, there is a need to address some parts of the economy. “About a third of the population can take care of itself as either they are employed in the formal sector or have government jobs. The rest, who are in the agriculture sector or run small businesses, need help. The government is feeding nearly 80 crore people for the next five months,” he says, adding, “small companies and unorganised vendors have been unable to deal with the crisis. Data also shows that listed companies are gaining market share at the cost of small businesses. These people have benefitted through the government scheme where banks lend with a guarantee from the government. Given the constraints of the economy, this is a more scientific way of dealing with the issue rather than sending out cheques.”

Unlike the June quarter, the respondents were hopeful about the September quarter. They gave better ratings than in the previous survey on all five parameters — economic prospects of the business, overall economic situation, demand conditions, hiring and profits. Their rating for the overall economic situation in the next quarter was