Demand, which has grown ahead of expectations so far, is likely to maintain the same pace for the rest of FY21. 75% of poll participants said the revenue growth of their companies is likely to top 10% in FY22. Of this, 33% believe it could go as high as 20% plus.
But the poll also revealed some anxieties about demand sustaining in the wake of rising inflation and the impact on interest rates. A majority of respondents (54%) also said that the government has not done enough to spur demand.
“The economy is picking up significantly faster than anticipated in March-April,” said Keki Mistry, vice chairman, HDFC Ltd. “People seem to have taken Covid-19 in their stride and are going about their day-to-day business pretty much as usual. Many sectors are seeing growth equal to (and in some cases better than) pre-Covid levels.”
The poll was conducted last week with 60 CEOs, with participation ranging from auto and aviation to travel and real estate.
“The worst seems to be behind us and there are multiple sectors where recovery has been better than expected,” said Amitabh Chaudhury, CEO, Axis Bank. “The trend in credit growth also seems to be improving. In fact, our secured disbursements are now near pre-Covid levels. However, since there has been a significant scarring of so many people who are a large part of the workforce, it will definitely take some time. The recovery is uneven and missing out some of the vulnerable segments.
“Banks are working with RBI and government to deliver credit to the most impacted segments through schemes like ECLGS,” he said.
Many CEOs also believe that inflation is a clear and a present danger to consumer sentiment. About 63% of the poll’s respondents said that rising inflation will hurt consumer demand. About 68% of CEOs believe that interest rates will stay at current levels, contrary to expectations of a series of steady rate cuts during the monsoon period this year with about 18% saying that rates will rise from current levels.
“The lockdown has impacted the economy and the focus is now on getting a strong recovery in 2021,” said Sunil Kataria CEO India and Saarc, Godrej Consumer Products. “Going forward, we would like the government to focus on creating more jobs. This would require investments in infrastructure and core sectors. The rural sector stimulus along with a good monsoon has led to some recovery in rural consumption, but it’s important that this is sustained. Lastly, MSMEs would need more credit support programmes to accelerate their recovery.”
About 75% CEOs said consumer demand in the past three months has been better than expected.
India Inc attributed the strong demand to a number of reasons such as the expansion of credit, strong liquidity, rate cuts and festive period buying. Real estate and home finance companies believe that the need for owning a home, affordable rates and state-centric tax sops such as stamp duty cuts have spurred housing demand. Auto companies believe that pent-up demand and the need to own a vehicle and reduce dependency on public transport have pushed up sales of cars and two-wheelers. Rural demand has also benefited from strong monsoon and good kharif production.