Home Big Grid Need for fiscal support to boost private consumption, revive economy: Report

Need for fiscal support to boost private consumption, revive economy: Report

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Pointing out that business sentiment in the country has been deeply impacted due to the second wave of the Covid-19 pandemic, the latest FICCI Business Confidence Survey has revealed that the majority of participants in the study stated weak demand conditions and increasing raw material costs as the most concerning issues.

The latest round of FICCI’s Business Confidence Survey revealed sharp deterioration in the optimism level of corporate India. The Overall Business Confidence Index nosedived and stood at 51.5 in the current round after reporting a decadal high value of 74.2 in the previous round. Worsening in current conditions as well as muted expectations about the near-term prospects on the back of a sweeping second wave of coronavirus infections pulled down the overall index value.

The survey drew responses from about 180 companies with a turnover ranging from Rs 1 crore to Rs 60,000 crore and belonging to a wide array of sectors. The survey gauged expectations of the respondents for the period April to September 2021.

“The proportion of respondents citing weak demand situation as a constraining factor increased to 70% in the latest survey round vis-à-vis 56% respondents stating the same in the previous round. Lower household savings due to higher health expenditure incurred in the second wave as well as fear of a third wave is restricting growth in private consumption. In addition, there has been permanent impairment to income for many households who have faced job losses or have lost bread earners to Covid-19,” the survey said.

“A large proportion of the participating companies emphasized the problem in availing credit and called upon the banking community to enhance lending at a reasonable rate. Alongside, RBI should continue to ensure ample liquidity in the system and must take additional measures to encourage banks to lend more,” the survey stated.

“On the fiscal side, companies unanimously felt the need for another fiscal package, focusing majorly on addressing demand. Demand boosting measures such as direct income support to rural as well as urban poor, income tax reductions for the middle class and temporary reductions in indirect taxes must be urgently considered,” it added.