COVID-19 & ITS IMPACT ON INDIAN BUSINESS & ECONOMY
Coronavirus outbreak was first reported in Wuhan, China on 31 December, 2019. Before reading in detail about the impact, first, let us study about coronavirus.
Coronavirus (CoV) is a large family of viruses that causes illness. It ranges from the common cold to more severe diseases like Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). The novel coronavirus is a new strain of virus that has not been identified in human so far.
WHO is working closely with global experts, governments, and other health organizations to provide advice to the countries about precautionary and preventive measures.
According to the survey, COVID-19 is having a ‘deep impact’ on Indian businesses, over the coming month’s jobs are at high risk because firms are looking for some reduction in manpower. Further, it is added that already COVID-19 crisis has caused an unprecedented collapse in economic activities over the last few weeks. It is said that businesses are grappling with “tremendous uncertainty” about their future.
The survey also found that:
– In respect to the approved expansion plans, around 61 per cent of the respondents expect to postpone such expansions for a period of up to 6 or 12 months, while 33 per cent expect it to for more than 12 months.
– Surveyed firms of around 60 per cent have postponed their fund-raising plans for the next 6-12 months. Also, nearly 25 per cent of the firms have decided the same.
– Surveyed firms around 43 per cent have reported that they do not predict an impact on exports. Further, 34 per cent said that exports would take a hit by more than 10 per cent.
Besides the impact on human lives and global supply chain, the pandemic is a severe demand shock which has offset the green shoots of recovery of the Indian economy that were visible towards the end of 2019 and early 2020.The International Monetary Fund (IMF) has projected the Indian economy to grow at 1.9% in 2020-21. Nearly 162 countries are steadily going into lockdown, and businesses across the globe are operating in fear of an impending collapse of global financial markets. This situation, clubbed with sluggish economic growth in the previous year, especially in a developing country like India, is leading to extremely volatile market conditions. Challenges are impacting all the three major contributors to GDP- private consumption, investment and external trade.
Further, according to the World Bank’s assessment, India is expected to grow 1.5 per cent to 2.8 per cent. And IMF projected a GDP growth of 1.9 per cent for India in 2020 because the global economy is affected by the COVID pandemic, the worst recession since the Great Depression in the 1930s. Also, we can’t ignore that the lockdown and pandemic hit several sectors including MSME, hospitality, civil aviation, agriculture and allied sector.
Let’s understand how the COVID-19 is impacting various businesses in India.
Chemical Industry: Some chemical plants have been shut down in China. So there will be restrictions on shipments/logistics. It was found that 20% of the production has been impacted due to the disruption in raw material supply. China is a major supplier of Indigo that is required for denim. Business in India is likely to get affected so people securing their supplies. However, it is an opportunity. US and EU will try and diversify their markets. Some of the business can be diverted to India which can also be taken as an advantage.
Shipping Industry: Coronavirus outbreak has impacted the business of cargo movement service providers. As per the sources, per day per vessel has declined by more than 75-80% in dry bulk trade.
Auto Industry: Its impact on Indian companies will vary and depend upon the extent of the business with China. China’s business no doubt is affected. However, current levels of the inventory seem to be sufficient for the Indian industry. If the shutdown in China continues then it is expected to result in an 8-10% contraction of Indian auto manufacturing in 2020.
Pharmaceuticals Industry: Despite being one of the top formulations of drug exporters in the world, the pharma industry of India relies heavily on import as of bulk drugs. Due to the coronavirus outbreak, it will also be impacted.
Textiles Industry: Due to coronavirus outbreak, several garments/textile factories in China have halted operations that in turn affecting the exports of fabric, yarn and other raw materials from India.
Solar Power Sector: Indian developers may face some shortfall of raw materials needed in solar panels/cells and limited stocks from China
Electronics Industry: The major supplier is China in electronics being a final product or raw material used in the electronic industry. India’s electronic industry may face supply disruptions, production, reduction impact on product prices due to heavy dependence on electronics component supply directly or indirectly and local manufacturing.
IT Industry: The New Year holidays in China has been extended due to coronavirus outbreak that adversely impacted the revenue and growth of Indian IT companies.
Tourism and Aviation: Due to the coronavirus outbreak, the inflow of tourists from China and from other East Asian regions to India will lose that will impact the tourism sector and revenue.
An outbreak of COVID-19 impacted the whole world and has been felt across industries. The outbreak is declared as a national emergency by the World Health Organisation. In India the three major contributors to GDP namely private consumption, investment and external trade will all get affected. World and Indian economy are attempting to mitigate the health risks of COVID-19 with the economic risks and necessary measures needed will be taken to improve it.
The learning curve
Every crisis serves as a learning opportunity for organizations, and this pandemic is proving to be quite the lesson. Here’s how organizations are figuring out their next moves.
With major cities on lockdown, organizations have had no choice but to dig into their business continuity and contingency plans. Ever since the first COVID-19 case was confirmed in India, numerous companies have instituted a ‘work from home’ drill using critical resources to understand whether remote working conditions are feasible. That being said, remote working also has its limitations and cannot be carried out by other sectors like retail, hospitality, or manufacturing, leaving them no choice but to face business interruption.
Safety measures for employees
Employee safety is the need of the hour. Still, with no experience of dealing with a virus that has the potential to spread rapidly, most companies are brushing off their hands by asking employees to stay home. Some organizations, however, are implementing measures like temperature screening, disinfection of office premises, setting up COVID-19 response teams, distribution of COVID-19 precautionary packages.
An open line of communication
Even though the mortality rate of COVID-19 is lower than the 1918 influenza pandemic, it has caused a widespread panic due to unclear lines of communication. Organizations are stepping up and maintaining an open line of communication with all their stakeholders, including employees and customers.
Opportunity in a crisis
Like India, several international economies are becoming cognizant of the risk they face by being overly dependent on one market. Making the current situation a learning opportunity, CXOs of Indian multinationals, who recently attended the annual meeting of the Confederation of Indian Industry (CII), believe this is the time India can work on capturing potentially 40% of their competitor’s market share by looking at indigenous production of goods, furthering the country’s Make in India campaign.