Majority of Indian companies are likely to lower employee bonuses and slash their festive budget by around 40% this season due to lower earnings and sales, an industry survey has revealed.
According to a survey conduced by the Associated Chamber of Commerce and Industry (Assocham), companies would significantly cut or avoid paying bonuses in the backdrop of a severe slowdown, pressure on earnings, and spiralling inflation further confounded by a sharp depreciation of rupee. “Slowdown cast shadow over festivals of lights,” said DS Rawat, Assocham secretary general, adding that due to steep fall in rupee, the budget on Diwali and other ensuing festivals like Dhanteras and Christmas may see a cut of around 40% this year.
The survey included responses from 2,500 small, medium and large companies located in major cities including Mumbai, Delhi NCR, Chennai, Kolkata, Ahmedabad, Bangalore and Hyderabad. The sectors covered included pharma, consumer durables, electronics, gems and jewellery, automobiles, FMCG, manufacturing and infrastructure. “The tough business environment marked by high inflation, drop in corporate earnings and decline in new business orders is taking a toll on this festive season,” Rawat.
He said cut in corporate budget and curtailing in bonuses have wider ramifications in the sense that the consumers will be forced to spend far less during the festival season, affecting in turn the overall business further. “This is a vicious cycle which somehow needs to be broken,” Rawat said.
The corporates worst affected by the slowdown are in consumer durables, gems and jewellery, FMCG, electronics, automobile and real estate. They will be spending far less and will keep a tight leash on their budgets, highlighted the survey.
The survey points out that the sales of electronics goods, TV, laptop, washing machines, kitchen appliances, handsets, mobile accessories, personal computer games generally tend to rise during the festive seasons. However, the response is likely to be lukewarm this season. “Overall, the survey expected far less fireworks of enthusiasm in the coming Diwali and other festivals as there would be less money in the hands of consumers,” Assocham said in the survey report. “It is high prices of food articles which has also dampened the festive spirit. The increasing cost of transport in the wake of rising petrol prices is making it worse for the lower and middle class families,” it said.