Industries’ confidence jumps in Q2; ease in lockdown restrictions make firms hopeful for speedy recovery

The confidence of Indian industries significantly rose in the second quarter of the current fiscal year 2020-21. CARE Ratings’ Industry Confidence Index improved sequentially by a strong 63.9 per cent and by 19 per cent on-year to 96 during the fiscal’s second quarter. The rise in confidence is primarily attributed to the easing of lockdown restrictions from June 2020, which supported the resumption of economic activities. This, in turn, aided the consumer demand and also the industry operations to run at higher capacities, Care ratings said in a report. The confidence index had touched a low of 58 in the first quarter due to Covid-19 induced lockdown restrictions.

The industry’s confidence has touched a level of 96 after a gap of five quarters. Earlier, it had contracted to the range of 62-93 in FY20 due to sustained economic slowdown during the year. In the survey conducted by the rating agency, it was found a majority of industries among the 47 industries surveyed suffered worsened revenues, prices and modified credit ratio in Q2. 

However, it is to be noted that the number of industries that showed an improvement in major parameters increased in the quarter. The index of improved responses touched 114 in Q2, from 61 in Q1 while the index of worsened responses fell from 179 in Q1 to 126 in Q2. However, the industries related to textiles, roads & highways, and gems & jewellery remained in the worsened category for all the 6 parameters considered during Q2 FY21. The six parameters were revenues, operating margin, prices, modified credit ratio, interest coverage ratio, and outlook. 

Meanwhile, in the wake of the coronavirus pandemic, the Modi government launched the Atmanirbhar Bharat package that included various measures for the industries. One such measure was an additional Rs 10,200 crore given for capital expenditure and industrial expenditure. The government said that the move would benefit green energy companies along with domestic companies making defence equipment.