The Pandemic will Change Global Economy

The Pandemic

Those who say there are no letters left in the alphabet to describe the evolution of the world economy after the pandemic are absolutely right. It is abundantly clear now that we cannot expect to see a rapid V-shaped recovery nor should we expect a complete L-shaped recovery.

The big question is :

Why would the pandemic bring lower growth ? There are several reasons :

1) Companies will be less profitable and will react by cutting fixed asset investment.

2) The distribution of income will worsen worldwide. In fact, the pandemic has caused a serious deterioration in business profitability throughout the world.

3) State intervention in the economy is leading to a much larger share of zombee companies .the fact that interest rates are to remain low will make it possible for the Government to continue to finance such unproductive companies and their related missallous savings.

4) Unstable Capital Flows — The combination of ultra -abundant global liquidity and fluctuations in risk aversion can lead to highly unstable capital focus , which remains crucial for many emerging countries. And the more an emerging company depends on external financing , the more costly this situation can be in terms of volatility of capital flows and economic performance.
Another form of financial instability may arise from the growing doubt surrounding the role of the dollar in the world economy , stemming from the lack of US leadership ,the sharp increase in US external debt and the ultra -expansionary monetary policy of the Federal Reserve

The Hiatus on Education — There has been a loss of human capital due to the discontinuation of education programmes globally .There is bound to be a reduction in fertility rates for many years, given the negative impact of the pandemic on household income for years to come.

If we analyse each of these points in greater detail, lower growth in the medium term seems unavoidable and with it , the continuation of the ultra-low interest rate environment we are in. The loss of human capital , financial capital , in addition to destruction of business fabric due to bankruptcies , are all bound to have lasting effects , which demand policies cannot do about much.

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MSME Sector in India- Road Ahead

MSME Sector in India

Micro Small and Medium Enterprises ( MSME) have always played a vital role in the Indian Economy. Not only do the 6.3 Crores MSME’s in India contribute one third to the GDP of the country but also provide employment to large sections of society.

Acknowledging the importance of the section, the Government of India ( in 2019) envisioned that the sector would account for half of India’s GDP and add 50 million fresh jobs over the next five years.

However, there were significant signs of a slowdown due to COVID19 (on the demand side) and structural reforms (on the supply side) like GST rollout and demonetisation also haad adverse effects on MSME sector.

Way Forward :

Developing Bond Market

With India’s Bond Markets starting to take shape , promotion of MSME Bond issuances can provide a fillip to debt capital markets participation of MSME;s.

While such issuance will provide lower interest rates for MSME’s than other financial institutions/ intermediaries charge , they will also be a viable high-yield instrument for informed and educated investors operating in the bond market.

Creation of Independent Regulator:

Given the growing importance of the data economy , it is paramount that the Government creates an independent body which can advise and provide consultancy to MSMEs and enable them to win in this new digital world.

Reforming Labour Laws:

Labour laws are not very conducive to MSME growth. They must strike the right balance providing a growth oriented framework for MSME’s to run and providing sufficient protection for the rights of workers.

Improving Regulation:

While ease of doing business has been a focus area , the reporting , approval and compliance requirements for small businesses continue to border on the higher side.

If we truly want to create a country where MSMEs can influence our economic destiny , it is imperative that they are provided with a hassle-free regulatory framework which works for them and not function as an impediment for growth.

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EMPLOYMENT SCENARIO in INDIAN SERVICE SECTOR POST COVID 19

Employment Scenario Post Covid

Following the festive season in October2020, India’s Service Sector posted an expansion for the first time since February as malls and restaurants resumed business post lifting of mobility restrictions.

Indian Services Companies suggested that the relaxation of COVID19 restrictions enabled them to secure new work and lift business activity in October. On the price front , the rate of input cost inflation picked up to an eight month high , but there was a softer rise in prices charged for the provision of services.

Many economists predicted that there would be a V-shaped economic recovery at the end of the year , while some feared it could also be W-shaped.

Let us take a detailed look at the employment scenario on the various service sectors in India post Covid19

Information Technology ( IT ) :

There has been a drop in demand for Software Developers and Network Engineers , but a big boost in demand for Cybersecurity professionals as well as System Engineers and Administrators. For IT Engineers, there has been as much as a 20% reduction in salaries.

AVIATION :

Flyers have come back on domestic routes while international passenger services continue to be restricted and operated under ‘Travel Bubbles’ through bilateral agreements with partner countries. Interestingly, the air cargo market has continued to grow steadily to meet the increasing demand for food essentials and medical aid. the fall in passenger demand has also prompted many carriers to retrofit aircraft to carry more cargo across borders , in search of better margins and cash flows.

HOSPITALITY :

In India, hospitality industry has evolved to the contemporary needs as they resumed services after lockdown. the Central & State Governments have issued standard operating procedures and the change is visible at the hotels , eateries and monuments. The security scan at the entrance has thermal screening and sanitization added to the checks , the lobbies are being sanitized more often and the staff is more cautious than before.

HEALTHCARE :

Despite initial hiccups, the healthcare system in India managed to withstand the pandemic. The various effects in manufacturing of medical equipment , disposables, drugs and the most recent vaccine efforts made by India has placed it as a global leader. The healthcare sector , in terms of employment, looks very promising.

According to the National Skill Development Corporation ( NSDC) , the logistics sector has emerged as the top employment generating sector in India in the aftermath of the coronavirus disease. Logistics companies should design a strategic plan to prove their resilience and dynamism by helping the exporters and MSMEs to showcase their products overseas. This will help the MSME’s to revive production in full swing and shift to e-commerce completely.

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Training Program Conducted by B3 Brain Behind Brand

B3 Brain Behind Brand conducted a training program and workshop for sales personnel of Aurum Jewels Ltd. The program took place at Hotel Lalit Great Eastern, Kolkata on 24 January, 2021.

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.