Coronavirus Outbreak: About 80% Of India Inc. Sees Fall In Cash Flows From Virus Impact, Says Ficci Survey

Facing a slowdown in growth, in the third quarter of the current fiscal the economy grew at 4.7 percent- lowest in six years.

People with and without protective masks wait for a bus at a stand outside the All India Institute Of Medical Sciences in New Delhi, India. Photographer: Prashanth Vishwanathan/Bloomberg
People with and without protective masks wait for a bus at a stand outside the All India Institute Of Medical Sciences in New Delhi, India. Photographer: Prashanth Vishwanathan/Bloomberg

More than Indian companies see an impact on their operations and nearly 80 percent have witnessed decline in cash flows due to the coronavirus outbreak, according to a survey.

The pandemic has presented fresh challenges for the country's economy, causing severe disruptive impact on both demand and supply side elements which has the potential to derail the growth story, according to a poll conducted by industry body Federation of Indian Chambers of Commerce and Industry.

The country is already experiencing a slowdown in growth. In the third quarter of the current fiscal, the economy grew at 4.7 percent, slowest in six years.

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A significant 53 percent of Indian businesses indicate the marked impact of the coronavirus pandemic on business operations even at early stages, FICCI said.

The pandemic has significantly impacted the cash flow at organisations with almost 80 percent reporting a decrease in cash flow, the survey showed.

The findings were based on interactive sessions and survey conducted by FICCI amongst the industry members.

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Besides the direct impact on demand and supply of goods and services, businesses are also facing reduced cash flows due to slowing economic activity, which in turn is having an impact on all payments including to those for employees, interest, loan repayments and taxes, it said.

It said combination of monetary, fiscal and financial market measures is needed to help the businesses and people cope with the crisis.

The Reserve Bank of India need to support the Indian industry and economy at this juncture by bringing down the cost of funds further through reduction in policy rates, say, by close to 100 basis points, it said.

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Banks should be given a flexibility to reschedule payment terms without the need for provisioning.

The survey said there is need to maintain liquidity at surplus levels and provide special liquidity support for any companies/NBFCs/banks that come under strain due to intensifying risk aversion in financial markets or due to large demand shock.

With the corporate bond and commercial paper markets are facing liquidity challenges, the RBI should intervene, either directly or through the commercial banking system, to ensure adequate flow of funds into the market.

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The government should not cut its capital expenditure plans despite any shortfall in tax collections, it said.

It also said the Insolvency and Bankruptcy Code should be suspended for a short period for sectors like aviation and hotel, that are severely impacted due to Covid-19.

The survey showed that more than 60 percent of respondents have seen impact on their supply chains and expect the situation to worsen further.

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Nearly 42 percent of the respondents feel that it could take up to three months for normalcy to return, the survey highlighted.

Most of the organisations have brought in a renewed focus on hygiene aspects concerning the pandemic.

Almost 40 percent have put in place stringent checks on people entering their offices and disinfection while nearly 30 percent organisation have already put in place work-from-home policies for their employees, it said.