Indian economic recovery mired in rising raw material cost: Survey

New Delhi: A quick survey conducted by the PHD Chamber of Commerce and Industry to assess the impact of Covid 2.0 on the economy reveals that the rising cost of raw materials has impacted the pace of economic recovery in the country.

"The supply chain disruptions are causing skyrocketing commodity prices, which have severely impacted the price-cost margins of the businesses in the difficult pandemic time of coronavirus," said Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry.

The survey, which was conducted between April and May 2020, involved businesses across the micro, small, medium and large enterprises across 34 sectors. While 73 per cent of the respondents said were struggling with the rising cost of raw materials, other key challenges faced by businesses included availability of working capital (64 per cent), Maintaining price-cost margins/profitability (63 per cent), Weakening of demand (62 per cent); Retaining of the full workforce (61 per cent), Costs of the deployed workforce (60 per cent), Payment of wages/salaries to workers/employees (55 per cent), Repayment of loans/payment of EMIs (53 per cent), Costs of capital (52 per cent) and Costs of compliances (51 per cent).

While listing out the key strategic plans/focus areas to tackle the situation, the survey found that companies are prioritising vaccination of employees (73 per cent) as one of the key measures. Businesses are also focusing on increasing sales volume (64 per cent), increasing the scale of business operations (64 per cent), enhancing the competitiveness of business (64 per cent), cut in costs of business operations (64 per cent), enhancing the price-cost margin (55 per cent), focusing on innovation, research & development (55 per cent), enhancing business operations in the domestic market (55 per cent), reducing the workforce in business operations (45 per cent), and enhancing business operations in the international market (36 per cent).

Respondents also rated the relief measures taken by the government to mitigate the effects of the pandemic. According to the survey, 47 per cent of the respondents rated the government's measures at 7 out of 10, while 42 per cent rated the vaccination drive at 6.

Aggarwal also urged the government to speed up the vaccination process over the next 2-3 months to cover most of the population. "Going ahead, a substantial stimulus to create effective strides for futuristic growth trajectory for Indian Economy and for diminishing the daunting impact of the second wave of the pandemic on economy, trade and industry would be crucial to support the economic momentum in this extremely difficult time," said Aggarwal.

"India's economic growth in FY 2021 contracted (-) 7.3 per cent due to the stringent lockdown in two months of 2020 to contain the spread of the virus. However, this statistical low base effect is expected to provide a good opportunity for India to attain a double-digit growth trajectory in FY 2022"added Aggarwal.