Solve for India
Published in

Solve for India

Solve for India

Restarting India: Implications for economic activities and sectorial dynamics

This is the first article in this series on the economic impact during the coronavirus crisis while flattening phase-in India. This article addresses how Indian businesses, consumers, and workers are equipped to resume their activities, even amid the ebb and flow of the virus, will decide how lives and livelihoods fare in India.

COVID-19 is an unprecedented humanitarian challenge for all countries. The COVID-19 pandemic has pushed humanity and the global economy into a crisis not seen since The Great Depression. Six weeks of national lockdown have given India the time to make a concerted effort to flatten the pandemic’s curve.

It is becoming increasingly clear that COVID-19 will not disappear immediately; the economy will need to be managed alongside persistent infection risks, possibly for a prolonged period.

Accelerate Integrated framework adoption to enable Innovative solutions

The framework to yield the lockdown- and restart-management capability will have to be granular and effective, with local implementation closely aligned to state- and central-government policy and support from high-quality communication.

Refocus digital efforts to reflect changing customer expectations. To adapt, companies need to quickly rethink customer journeys and accelerate the development of digital solutions.

The emphasis will be different for each sector. For many retailers, this includes creating a seamless e-commerce experience, enabling customers to complete everything they need to do online, from initial research and purchase to service and returns. For auto companies, this could mean establishing new digital distribution models to handle trade-ins, financing, servicing, and home delivery of cars. For industries such as airlines, ensuring health and safety will be essential, for example, by reinventing the passenger experience with “contactless” check-in, boarding, and in-flight experiences.

Government's strategic and tactile measure will decide the fate of our economy. The following responsibility matrix shows the implementation of hyper-local response to minimize the pandemic outbreak.

A framework to minimise the pandemic outbreak.(Source: Mckinsey Analysis)

With the granular understanding of the regional economic, governments can quickly identify places where the economy can be restarted.

To do that well, governments can assess both the risk of transmission and the relative economic importance of each sector. For instance, authorities might define importance using metrics such as total employment, vulnerable jobs, or contribution to the economy

After the establishment of the lockdown, we are currently in the phase of unlocking our socio-economical ecosystem. Perhaps, our economic system is primarily driven by the sectoral/industrial contribution.

In the upcoming articles, we are going to discuss the impact and traction of each sector.

Priorities to Ramp-Up and Return to Work

Change management and leadership are especially important as companies begin to ramp up. Change management enables the transformational moves that companies and organizations will need to make in the wake of COVID-19. Leadership­ creates direction and alignment, both of which are critical at the top, middle, and bottom of organizations. (source:bcg.com)

Understanding the impact on our economy

Before heading up to the solution, we should first understand how moderate or severe our economy got impacted. The below graph shows the impact of each sector v.s the time it will take to recovery.

  • Drugs & Pharmaceutical: Production is expected to recover quickly
  • Livestock: Prices and demand may increase after the outbreak.
  • Retail / Wholesales (non-food items): Sales of essential items may recover quickly, while sales of non-essential items might take slightly longer to recover.
  • Textiles: Discretionary spending is expected to remain muted for at least one quarter. However, the demand for essential commodities such as masks, cotton rolls, gauzes, etc. will not be negatively impacted.
  • Logistics: The slowdown in the tourism sector will have knock-on effects on passenger traffic. Heightened risk aversion will prolong the recovery.
  • Metals: The slowdown in business activity in automotive, construction and infrastructure sectors will inevitably drive down the demand for basic metals.
  • Automotive: Demand for cars is likely to be deferred or dropped given low consumer confidence, subdued economic activity, lower disposable income and higher prices.
  • Entertainment: The biggest concern is the likely continuation of social distancing measures to avoid the risk of any relapses.
  • Banking: 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.
  • Gems & Jewellery: Demand for gems and jewellery is expected to be severely impacted over the next couple of quarters.
  • Tourism: Both foreign tourist arrivals and domestic tourist movements are expected to remain very low.
  • Hospitality: The slowdown in the tourism sector will have knock-on effects on hospitality. Many businesses are expected to cut down travel and accommodation costs for their employees.
  • Electronics: Demand for white goods and other high-end consumer durables will remain impaired as consumers are expected to postpone their purchases. About 50–60% of the products and 70–80% of the components are imported, and a shortage of products/components will be certain.

Micro, Small, and Medium Enterprises (MSMEs)

Recessionary pressures across the globe are expected to have a direct impact on the level of global exports. Given that MSMEs contribute to over 40% of India’s exports, the impact will be severe and linger for a longer time.

MSMEs are expected to experience severe liquidity problems due to delayed payments from their customers. The strain in the banking system is expected to increase the credit gap for MSMEs.

Coronavirus is accelerating digital-strategy

With each advance in treatment, testing, and tracking, society is moving to contain COVID-19. The fight is ongoing, and it will be won. In this phase, companies should be taking stock of how their people and organizational models can be bent and rebuilt to deal with the ramp-up. If done right, this will reveal new opportunities to generate business value, outperform the competitors, and prosper in the new now.

Coming up next:

This is the 1st article as part of a series — Solve for India. To demystify the impact of COVID-19 on the Indian economy, how our lives and livelihood are affected with the help of sectorial lens and other relevant topics to help you see beyond the news.

Till then, Stay Safe

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Souman Roy

Souman Roy

Business Intelligence practitioner | Problem Solver | Founder MetaInsights, Solve for India