The economy has shown mild pace but a large part of it is still not showing strength. Demand is low and credit growth is mild.
From the December quarter profits of corporate companies, it seemed that they could make more good profits in the new financial year (2021-22). But these expectations do not seem to be fulfilled now. Even though the economy is showing some speed, the challenges of 2021-22 are big. In fact, the condition of large parts of the economy still remains fragile.
Pressure increases due to rise in commodity prices
Although companies may see an advantage in FY 2021-22 due to the low base in FY 2021-22, their profits may decline due to comparatively lower demand and rising costs. The biggest concern is due to rising commodity prices. Along with crude oil, the prices of all commodities are increasing, due to this it will be difficult for companies to control the cost in the coming days.
Decline in consumer demand due to decrease in earnings
The second concern is that after the decrease in demand from high earning families, it will be difficult to increase the demand among the general consumers. Analysts say that the lockdown has increased the need to buy houses and other things. Although the pace of sale of cheap homes will continue, but demand for some other things may come down.
In fact, due to Covid-19, the earnings of large population living in cities have been affected. This will definitely reduce consumption. In fact, the concern of corporate companies is increasing due to decrease in credit growth and non-demand. Therefore, companies doing better in the December quarter are now feeling that they will not achieve that growth in the new financial year.
Nidhi Malviya is fun loving girl. She writes at NoobFeeds about various topics related to Finance, Technology, Business etc.