Goa Inc expects business to improve only by September

PANAJI: As the world marked International Day for MSMEs on Saturday and 20 days into Unlock 1.0, business activity in Goa continues to struggle due to lack of demand, restricted cash flows and the uncertainty of the Covid-19 trajectory. This, industry representatives say, is keeping business sentiment in the state subdued.
Since June 8, when the Narendra Modi government announced the staggered easing of restrictions after over two months of lockdown, the supply chain has improved but cash flow continues to remain a headache, industry stakeholders say.
Two-thirds of the respondents in a survey conducted by the Confederation of India Industry (CII) reported capacity utilisation levels below 50%, while close to half of the companies said they had to resort to layoffs or salary cuts to survive the current situation.
A major proportion of respondents expect capacity utilisation levels to improve to 50-75% by the end of the year, with a rider that this would depend on the pandemic and the discovery of a vaccine for Covid-19.
“Overall, confidence is really low,” says Atrey Sawant, director of Mandovi Drydocks.
“Those who were thinking of expansions or investment have just vanished. Most people are waiting for September and the Covid numbers to go down. Only after that will confidence improve for further investment.”
About two-thirds of those surveyed by CII said they expect revenues to fall by over 40% in the April-June 2020 quarter. Goa’s retail sector has seen a sharp drop in sales with less than 20% of turnover being recorded by malls and large retail stores. The same is seen at restaurants, hardware stores, alcohol shops and furniture stores. While automobile servicing has picked up to near pre-Covid levels, sales of two-wheelers and four-wheelers have plunged by 75%, industry insiders say.
The CII survey found that 81% of industrial units continue to face strained cash flows even as fixed costs remain high. “Sales and other aspects are not coming to the levels we expected. Raw material rates have increased due to logistics and transportation disruptions,” president of Goa State Industries Association Damodar Kochkar, says.
Agreeing with Kochkar, president of Goa Chamber of Commerce and Industry (GCCI) Manoj Caculo says MSMEs continue to struggle due to delayed payments and lack of credit. “Cash flow is very, very bad because MSME payments are still stuck. A lot of people who applied for working capital or funding say their applications are stuck or the banks are telling the customers that they are not eligible for the schemes announced by the Centre. Since the market is down, there is no cash flow,” Caculo said.
GCCI has collated data on the number of industry loan applications rejected by banks in recent months along with the reasons for the rejection and has shared the information with the Centre through FICCI.
Goa’s IT sector has fared a bit better with work-from-home arrangements ensuring that despite the lockdown, client obligations continued to be met. “Most countries have started their unlock period and for that reason, people are coming back to business. Business opportunities have started increasing so we should start seeing some growth in the coming times,” says Mangirish Salelkar, CEO and co-founder of Umang.
With Covid-19 cases rising, industry watchers say any business recovery will depend on efforts to flatten the pandemic curve. “Hopefully by mid-September things should settle. At least another three months will go on like this,” Kochkar says.
Chairman and managing director of Kineco Kaman Shekhar Sardesai, voiced similar sentiments. “Covid and the related lockdown have impacted output and deliveries in the short term. We are hope momentum will pick up and hit the pre-Covid levels by September,” he said.