Coronavirus Pandemic: Are We Heading Towards An Economic Slowdown Or Is The Slowdown Heading Towards Us?

The GDP is at an all time low, the coronavirus pandemic has taken its toll on the Indian economy just like it is taking its toll globally. Consumption is the major chunk of the economy, since the consumption of various items other than food is declining, the GDP is bound to fall out. The 21-days lockdown is deepening the already incubated recession in the country. Social distancing measures are the need of the hour but are also hampering the growth. It is creating a chaos in the sector which can only function from the office. Malls, movie theatres, restaurants and retailers are the worst hit sectors during this time.

Ambani is encouraging his employees to work from home till the end of this pandemic, corporates are functioning on a virtual basis but a large part of India is bound into the unorganised sector which cannot function virtually.

Poor people are sleeping with an empty stomach due to coronavirus situation

So, is the growth or survival going to be one sided for only the high and mighty educated ones?  The unorganised sector has been the worst hit one so far. Daily wage labourers are sleeping with an empty stomach. Children are not being provided with the basic education and there are no specific hospitals to treat the patients.

Exists a huge uncertainty

Top software consultancies say that their revenues will go down by huge numbers as they won’t be having many clients overseas anymore. Companies in the west and east will stop importing IT services from them.

HDFC securities expects the growth to go down by 2-7% because in slow speed of the decision-making process amongst the people. There exists a huge uncertainty about the future which will hamper the decision-making power of the current times.

Flights are getting cancelled

Since there are a lot of travel restrictions, various sectors will get directly affected by it and plenty will get indirect slowdown from it. Airline sector comes under the direct category. Unfolding of this crisis may take the Indian aviation sector back by half a decade.  The “Covid-19 & the State of the Indian Aviation Industry” report, released by Capa India recently, reveals that local air travel in the country will likely crash from 14 crore in 2019-20 to around 8-9 crore in the next financial year (2020-21). Only a few airlines will survive this crisis.

People who had pre booked their tickets are now getting refunds. There exists a normal refund policy for this sector so they are liquidating day by day due to this reason. Some companies like indigo are offering credit notes to passengers instead of refund to save the money for tougher times ahead. Fleets of airplanes are kept idle. Air India won’t levy no-show charges till the end of this month. It means passengers can use the fare to book a future flight even if they don’t pro-actively cancel tickets.

Go Air is offering passengers of a cancelled flight the option to even change destinations at a future date. Passengers, however, will have to pay the fare difference, if any.

Another noteworthy sector is the crude oil sector. Oil refineries throughout the world have stopped their operations due to the sudden decline in the demand. “If pipelines get clogged up as refineries shut down, inventories cannot build, reducing the cushion and creating a very quick risk reversal towards oil shortages,” Goldman said in a note. Price of oil is lower than the price of shipping it at the moment. If the aviation haul does not recover, the oil sector will face repercussions. The fat rates of return projected for the oil and gas projects have slumped from about 20% down to 6%, an official said.

The Indian government has closed its borders just like other countries.

Due to this, the hospitality sector has been one of the worst hit sectors. The cascading effect of the coronavirus pandemic will cost the Indian hospitality industry losses to the tune of ₹620 crore.

Hotelivate, a hospitality consultancy firm has in a report said that the Indian hospitality industry is likely to be hit really hard. The report suggested that domestic hotel companies that follow the fiscal year regime, this amounts to a weak quarter 4, FY20 and a weaker quarter 1, FY21. A large chunk of the Indian GDP (about 10%) is contributed by the tourism industry. If the coronavirus pandemic leaves an ever-growing effect, this huge chunk will be directly in dwindles. 3.8 crore people might lose their jobs.

The apparel sector will also see stark comparison from last year. India exports majority of the apparel that it creates. 60% revenue is coming directly from the exports. Europe in itself accounts for a third of this export revenue and since it has been declaring the epicentre of this epidemic by the WHO, the exports are supposed to go down.

The power nations are showing a grippling effect, what will happen to India?

The coronavirus cases in India are surging and the Pm has urged the citizens to sit at home. Due to this there are a few sectors which are sky rocketing during this lockdown. This lockdown is supposed to aid the telecom sector in the country. Work from home and excessive use of social media is resulting in increased usage of internet services. Various notable personalities have quoted that the new ways to work are expected to boost data usage by 10-15 percent in the home broadband and mobile space in India, according to Rajiv Sharma, head of equity research and telecom analyst at SBICAP Securities.

The medical and health care sector is in the forefront and coming forward with all they have. Medical equipment’s which have one-time use are high in demand. Face masks, sanitisers and gloves are high demand and stocks are running out in all parts of the country. This is resulting in new players entering the market and showcasing their potential. Since the government has fast-tracked manufacturing permission, various firms have come forward with their products.

FMCG sector is shining in this crisis. It remains unbeaten. Demand for household goods has gone ten-fold during the 21-day lockdown. There has been heavy stockpiling of not only essential food items but also indulgence items like biscuits, chocolates, salty snacks and cookies. Overall, the Indian economy should be prepared to face the economic recession at a global level and the funds which are already existing, must be used at the right time, in the right manner.

If proper financial governance isn’t carried out in our country at this stage, it will result in heavy and non-recoverable losses in the future. All the long-term plans should be restructured in a way that they fulfil the short-term needs. The big hit which is faced by almost every sector must be accounted for and relief should be given to boost them in the longer run.

Damages can only be prevented by the country if the government takes appropriate measures at the right time. Relief schemes must be made with a two-fold objective, not just to help the buyer, but also to help the seller. The ultimate resource which can move an economy is the people and if the people are not happy, no economy can move forward.

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