Effects of COVID19 on Indian Economy

Effects of COVID-19 on various sectors of Indian Economy.

India reported the first confirmed case of the COVID19 infection on 30th January 2020 in the state of Kerala .The affected had a travel history from Wuhan, China.

In order to stop the effect flow of the virus in the country , the Government declared a nationwide Lockdown which led to catastrophic consequences in the economic and social life of the people.

Information Technology(IT) Sector:

Indian IT firms became subject to the full impact of business disruption in the US and Europe due to the Covid 19-induced lockdown in the quarter to June, as analysts expected companies to report 5-10 per cent drop in revenue due to clients cancelling or putting off discretionary spending on technology in the three-month period.

Sectors such as travel and transportation, oil & gas and retail have been the most affected due to the lockdown in the six-month period, with several companies declaring bankruptcies due to the loss of their business.

It is a washout quarter that captures the full impact of uncertainty in business from Covid-19 led by lockdown, supply side compression and demand pullback. We expect retail, travel and transport, hospitality and oil & Gas verticals to be severely impacted and do not expect recovery in Q2 also,” Aniket Pande, IT sector analyst with brokerage Prabhudas Lilladher wrote in a report.

In the near future, IT companies could feel the heat of pricing pressure, revenue loss due to lockdown (in India and many countries globally), client bankruptcy and slower client decision making led by lower discretionary spends,” wrote Devang Bhatt at brokerage ICICI Direct.

Indian IT firms are expected to follow Accenture, which lowered its growth forecast to 3-6% from 6-8% due to business impact from the Covid-19 impact.

Indian Retail Industry(IRI)

Indian Retail Industry has more than 15 million retailers, both small and big, traditional and modern trade. Retail employs 40-50 million Indians directly of which modern trade employs more than 6 million Indians equaling to almost 12 per cent of the total Retail consumption of the country. Retail contributes to approx. 40 per cent of India’s Consumption and 10 per cent to India’s GDP.

The lockdown to prevent the spread of coronavirus in the country has greatly affected retail business. Most stores, except stores selling essential food & grocery, have been shut across the country. Garments, saris, electronics, mobile phones, furniture, hardware etc. almost all stores are closed. Non-Grocery/food retailers are reporting 80 per cent to 100 per cent reduction in sales. Even retailers of essential items are facing losses as they aren’t allowed to sell non-essential items, which would bring them higher margin.

Manufacturing Industry

The ongoing lockdown has put a lot of strain on the manufacturing industry, which contributes almost 20% of the GDP. Of this, 50% is contributed by the auto industry. Even prior to the lockdown, the auto industry was not in a great shape, with sales down by more than 15% and production cuts of the order of 5 to 10% or more. In the unorganised industry, the situation was much worse, as the uncertainty would impact smaller organisations with lesser retentive power, due to their lower profitability. This is somewhat similar to the ‘root beer game’ effect in Operations Management parlance, where an event in the market can lead to highly amplified response from the suppliers, leading to short term overproduction and medium term discount sales. Choking of distribution channels due to this effect are not unknown and goods tend to get offloaded at lower prices, providing volume support, but hitting the profit and profitability.

Manufacturing industry has been hit in many ways due to the Corona effect. To begin with, lower production, due to lower offtake. This takes a little longer to manifest itself, as, some distributors, sensing an opportunity to earn profits in a developing shortage situation, tend to carry on with the sales, but with an extended schedule of deferred payments. Longer credit days are given by the producer, who is keen on continuing with operations, before a complete shutdown. More and more employees stop coming in to work, due to government directives, thereby reducing the scale of operations, with consequent effect on quality, cost and production volumes. Over a period, this adversely affects the turnover, which slows down to a trickle. The uncertainties in the logistics leads to a cascading effect, transporters struggle to not only place vehicles for loading, they also are under pressure to adjust their quotes for carrying goods, as they also face lower attendance, with their operational risks increasing steeply. The slower rate of banking operations, shorter working hours, jammed and overloaded communications lines lead to delayed money transactions, thereby elevating monetary risks. The suppliers to large producers start feeling the pinch, and start to disengage, and play safe, in order to protect their interests, because their capacity to bear risks is much lower than their big customers. Finally, due to all these interruptions, the end user also starts postponing non-essential purchases, and disengages from the consuming processes, by postponing their demands.

Construction Industry

In this challenging time where the effects of the pandemic are being felt in every part of the world, the real estate sector has been widely affected.

Countries from all over the world are applying strict and extreme measures to break the chain of CoronaVirus. India during the Phase-2 status of COVID-19 which had led to businesses experimenting with digitalization through Work From Home model. There are mixed opinions about the real estate sector in India.

Compared to last year, residential property sales have plunged majorly in the first quarter of this year. From 78,510 units in 2019 to 45,200 units in 2020. Even though RBI announced a 75-basis-point repo rate cut bringing it down by 4.4%, the benefits of this are more likely to be seen in the long term.

According to various sources, housing sales declined by an average of 30% in major metropolitan cities. In Mumbai, there was a significant decline of 42% in the sales units and on the other hand, Bengaluru, Pune and Hyderabad’s sales decreased by 25%.

Hospitality Sector

The hospitality sector is dependent on travel, trade and tourism for its sustenance. The pandemic has decimated the operations of major sectors like the hotel industry, and also affiliate branches like tour guides and lodging.
Due to the corona virus outbreak, the massive rate of cancellations of bookings and trips have badly affected the ability of hotels to operate across India. As per Hotelivate, a hospitality consultancy, the hotel industry could have faced losses in the range of $1.3-1.55bn this year.

Currently, 15-25% of employees in branded hotel chains are either contractual or regular employees who would be the first victims of any mass lay-offs. In the USA, 7.7 million jobs were lost in the hospitality sector while the same figure stood at 1 million in France.

The corona virus has also had a devastating impact on occupancy rates on hotels. In March 2020, towards the end of which month the nationwide lockdown began, Indian hotels registered an 80% YoY decline in Occupancy Rate and 12-14% decline.

COVID-19 – THE NEW NORMAL—INDUSTRY SCENARIO

The world is facing humanity’s biggest crisis since World War II. Almost every country has been affected by the devastating Coronavirus disease (COVID-19). Undoubtedly, this Coronavirus has put the world economy at a major risk. Businesses and individuals alike have had to adapt rapidly to cope with uncertainty and anxiety in a seemingly unending ordeal. The perseverance of businesses and people has led to the emergence of a new landscape- a ‘New Normal’ in which the global communities continue to survive.

There are several channels through which the COVID-19 outbreak has affected Indian economy. The disruption of supply chains is a major one. Job loss is on the rise along with the slowdown in manufacturing and services activities. Workers have come back to their home in faraway places, thereby leaving the upcoming harvest in a state of uncertainty. Lack of orders and initiatives has lead to massive trade contraction. Besides, there has also been a disruption in air travel, fall in travel and tourism, contraction in outdoor entertainment industries and rise in bankruptcy.

The following sectors have been adversely affected by the pandemic:

  1. Apparel & Textile Industry has seen a disruption in labour supply, raw material unavailability, working capital constraints and restricted demand due to limited movement of people and purchasing ability.
  2. Auto Sector(including automobile & auto parts)has been facing challenges on account of lack of demand, global recession and failing income levels.
    As per McKinsey & Company, global trends impacting the automotive sector are as follows:

    • Global supply chain disruption
    • Cautious demand outlook
    • Shift in mobility trends
    • A resilient aftermarket
    • A potential auto investment
    • Deal activity to grow
  3. Manufacturing Sector : India offers a strong manufacturing base. During the COVID-19 pandemic, it has announced some incentives to global firms that seek to set up new operations or expand their existing operations. While India offers a range of advantages as manufacturing destinations, capitalizing on these opportunities requires a multipronged strategic approach across three broad dimensions:
    • Understanding the local regulations
    • Getting the location right
    • Building an India-specific organization structure         
  4. Building & Construction are generally leveraged and they are burdened with high-interest payments and lack of sales.
  5. Aviation & Tourism Sector has also been deprived of direct Government intervention. Since lockdown, people have stopped travelling apart from very essential travel.
  6. The Paper Industry has almost been wiped out as the world looks to adopt more environmentally friendly ways to live. Digital is the new normal.

For many business organizations, technology is considered to           be a support function with it being used as a means to get to an end. Following the pandemic, this has changed as technology has become the frontline requirement in most organizations. It’s importance can be comparable to that of revenue-generating functions such as sales and business development.

The next 4-5 years are going to be the golden period for media & entertainment. 3D/4D chatrooms and conference rooms are going to emerge rapidly. The largest chunk of media spending will shift from television to digital. Print media will cease to exist.

Businesses will experience an increase in productivity due to reduced staff. Remote work will see an uptick. The burden on local transport will ease.

High End Technology with an uninterrupted high-speed internet powering the video lectures, online projects, etc is now no more an option for the students since physical classrooms are minimal and will be kept that way in post Covid 19 scenario as well.

Coming to the professional sector,  Remote Working and Work from Home seem to accelerate as  companies are giving more stress upon two factors-Health and Hygiene. In this way, productivity has risen since commuting time, expenses and energy are saved. However, to ensure all these, advanced technologies such as Artificial Intelligence, Machine Learning & Deep Learning , automation, robotics, augmented reality, Block-Chain and 5G will be the most coveted for all the industrial sectors as every industrial segment starting from BFSI, Information technology, Manufacturing, Health care, Supply Chain & Logistics, Power etc have to develop and adopt new business models.

To conclude, this is the time to rethink and reset everything. Never before has the world come to a standstill where one can pick apart the moving pieces. If we rethink everything properly, we can overcome the challenges faced by the people in this pandemic such as environmental change, disfigured lifestyle and inequality.

Ensure A Successful Recruitment Drive With The Best Manpower Consultancy

Best Manpower Consultancy in Guwahati

The success of a company is largely dependent on its employees. If you want to find and hire the most qualified candidates for your organisation, make sure you get in touch with the best manpower consultancy in your city. Numerous companies nowadays prefer third-party recruiters as they specialise in staffing. They help job seekers find the best opening in their field of competence and let employers have access to numerous skilled and experienced candidates.

Continue reading

Know The Impact Of The Coronavirus Pandemic On Recruitment

The Novel Coronavirus Disease (COVID-19) outbreak has been declared as a pandemic by the World Health Organisation. With the total number of positive cases in India gradually rising, the Government has declared that the country will be under complete lockdown until the issue is under control. The Centre has asked states to ensure unhindered movement of essential goods and services. Such being the situation, it’s time people start maintaining social distancing by staying at home. Even recruiting companies are trying their level best to prevent the infection from spreading any further proscar .

recruitment consultant company

Continue reading

Unique Facts About Recruiting Agency For Companies In India

According to a survey conducted a few years back, a recruiting agency for companies in India has become a blessing for companies of every size. An experienced recruiter is the best professional a company can approach to take care of their staffing needs. They have adequate and updated knowledge about the employment market. Even if a candidate is passive or selective, they leave no stone unturned in ensuring to select the best for your company. If you are also planning to take the aid of a recruitment agency in India, there are a few unique facts about them you should know.

Recruiting agency for companies in India

Continue reading