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Post Corona Indian Economy

Post Corona  Indian Economy

After weeks of lockdown and tragic loss of life throughout the world, life is still uncertain. Some questions grapple us. Will the business reopen? Will the jobs come back? Will we travel again? Will there be a demand? Among these uncertain thoughts, one thing is certain: The pandemic has led to few economic tectonics which will become apparent only later. COVID-19 crisis is the defining global health crisis of our times and the toughest humanitarian challenge. The insidious times has taken a huge human toll besides creating huge setback to economy. It is very difficult on the part of renowned policymakers, economists, statesmen, epidemiologists to predict the changes in the post COVID world. The real effect and impact has started showing up now. It has just begun. I am very simple and modest person to put my thoughts to judge and write on the impact of COVID19. I will still try to share few ideas and points through my practical experience of running two institutes and interacting with many people. I will try to put it in words, knowing fully well that my readers know about it even better.

In India the three major contributors to GDP namely private consumption, investment and external trade are getting affected. Businesses are grappling with tremendous uncertainty about their future. COVID-19 is having a deep impact on Indian businesses, jobs are at high risk because firms are looking for trimming manpower. There is an unprecedented collapse in economic activities over the last few weeks of Lockdown and its extension. Human lives are disrupted, supply chains are disrupted and a sever demand shock has been created. The companies which have linkages with the COVID 19 hotspot countries are already experiencing a negative impact. Sectors that would be much affected includes logistics, auto, tourism, metals, drugs, pharmaceuticals, electronic goods, MSMEs and retail among others. However, essentials will pick up with a shorter recovery period and elective and luxury goods will continue to remain in wishlist and the demand may not be created sometime soon. I will elaborate the impact on few sectors:

Tourism and Hospitality

Tourism and Hospitality which were the growing sectors will be affected seriously. Most well to do families would go for a planned trip twice a year to Asian or European nations to unwind and enjoy the scenic beauty. Now no one would like to plan trip for the next two years. With tourism taking a backseat and meetings over internet, aviation industry is going to face huge losses. People would not take international flights until urgent. They would not even take domestic tours like it was done earlier. The fares will shoot up and will not be in the reach of average income Indian. They will think before going reversing half a century trend of International mobility. Slowdown in the tourism sector will have knock-on effects on hospitality. Occupancy rates may remain very low until 2021. In an effort to increase and improve the bottom lines, many businesses are expected to cut down travel and accommodation costs for their employees.

Education

The education sector will also face the side effects. People wanting to send their wards abroad would not take such expensive decisions. New forms of teaching and learning will come to the forefront and home will be the new classroom. Sports will also suffer. Sportspersons should practice every day but now they are stuck and not practicing properly. All sports events till December are canceled. Possibilities of Olympics in 2021 looks bleak. Events will not even get sponsorship.

Business and Retail

Given the widespread effect of COVID, business across sectors is looking gloomy impacting economy at large. Shutting down of malls and shops has severely hurt business for all retailers. This could lead to major job losses as companies won’t be able to sustain this for too long. The economic fallout defies calculation. Many countries face a far deeper and more savage economic shock than they have ever previously experienced. In sectors like retail, already under fierce pressure from online competition, the temporary lockdown may prove to be terminal. Many stores will not reopen, their jobs permanently lost. Millions of workers, small-business owners, and their families are facing catastrophe. The longer we sustain the lockdown, the deeper the economic scars, and the slower the recovery.

Banking

Banks will suffer the most. The paying capacity of people will go down with trimming off jobs, salaries and unemployment. People will not like to take loans. Bad loans will have to be written off. Due to weak domestic consumption and consumer sentiment, there can be a delay in investment which further adds pressure on the growth. The Reserve Bank of India (RBI) estimated that Non-Performing Assets (NPAs) may increase to 10.2-10.5% by September 2020. With the outbreak of COVID-19, this figure is expected to increase. The phase to recovery will depend on the outcome of the measures that the RBI has initiated and is likely to take place in the following weeks.

Automobile and Real Estate

Automobile and real estate will suffer. People would want to save instead of buying a property or car. Demand for cars is likely to be deferred or dropped given low consumer confidence, subdued economic activity, lower disposable income and higher prices. The real estate creates a large number of jobs for the poorest laborers and demand for several sectors like cement, steel, building material and finance. The housing sector will be in dire need of capital and banks have little risk appetite. This sector is the backbone of the economy and financial system as well and without increase in household income, this sector does not seem to bounce back soon.

Entertainment

The biggest concern is the likely continuation of social distancing measures to avoid the risk of any relapses. Revenues from advertisements will be dependent on revival of the aggregate demand in the economy. This industry will have new vistas like Netflix, Amazon Prime and other platforms of home based streaming.

Post corona, India can attract huge foreign capital for big bang divestment, as investors and global multinationals would look for alternatives to China. This can be a sense of positivity to be instilled during tough times. Or may be we can expect a miracle, like Newton who discovered the Law of gravitation while he was social distancing during the plague.