India, the third-largest economy in Asia and the fifth-largest in the world has a tough challenge ahead. The Covid-19 outbreak in India has led the entire nation to go into lockdown mode. The closure of theatres, malls, educational institutes, industries, and other commercial businesses has led to a significant drop in the overall economy of the country. To add to our woes, the Corona outbreak had hit us hard right when our economy’s growth was at the lowest in recent times.
Investments have shrunk, and consumption has drastically reduced halting our growth across sectors. India’s predicted growth projection for 2020-21 was cut from the earlier 6% to 5%. Not just the national economy, Covid-19 will likely hit the global growth rates for 2020 as well. Moody’s Investor Service has predicted the global growth rate for this year at a meager 2.5%, the threshold of recession for the global economy.
Struggle across all Sectors
Not just the manufacturing sector, but even service industries have seen a massive roadblock. Reduction in consumption, extended business closures, mass layoffs hurt the earnings of Indian companies across sectors. Covid-19 has added to the demand slowdown already faced by the Indian economy.
The recent virus outbreak has led to prolonged business disruptions and break in supply chains, all of which harm production and profits.
Here’s a look at how the Covid-19 outbreak has impacted a few of the major sectors.
Tourism, Travel & Aviation
The most severely hit sector. The curbs on international travel and restrictions on national travel have caused international bookings to drop by 75%. The numbers are expected to rise more. IndiGo, the biggest domestic airline, has cautioned that Covid-19 will have a massive impact on the March quarter earnings of the company. The decline in airline, hotel and tour operator revenues has the potential to lower corporate tax collections significantly, which in turn, will take a toll on the national economy.
Exports – Apparel, Chemicals, Automotive, Electronics, and Labour-Intensive Crafts
Global lockdowns are causing a significant challenge to Indian exports. The biggest markets for Indian exports – Europe, China, USA, Australia, have all placed curbs and restrictions on exportation.
Industry insiders predict that India will be the 10th most impacted economy due to the Covid-19 outbreak. As global supply chains are disrupted (mainly due to reduction of production in China), textiles, apparel, chemicals, automotive and electronics exports from India are expected to be halted or reduced.
With the WHO declaring Europe as the latest epicenter of the Covid-19 virus, exports to the EU (the biggest export destination for India) are likely to be halted for the next few months. Even though there has been news regarding factories in China back in operation, it may take around 5 – 6 months (or even more) to get global supply chains back to normal.
FMCG (Fast-Moving Consumer Goods)
During the financial crisis of 2008, which affected global economies, India managed to escape with minimal impact, thanks to a robust domestic consumer market. However, this time around, we may not be lucky. Leading FMCG companies have reported that national buying has slowed down significantly and consumer optimism is not high.
Agriculture
Since we are the beginning of the harvest season, agriculture is likely to be majorly impacted with the shutdown. Adding to the troubles are the unseasonal rains that have been reported in different parts of the country. Unpredictable rains have destroyed chana, mustard and wheat crops.
Now, with significant restrictions placed on, movement of goods and products across state borders, the situation doesn’t seem favorable for farmers. The sector is likely to be one among those that will suffer from collateral damage due to the measures taken for curbing the spread of the virus.
Manufacturing
The manufacturing sector is likely to take a double hit. First, global supply chain distortions will pose significant challenges not just from MNCs in the industry but also from domestic big name brands and SMEs. While manufacturing companies have not been ordered to halt production, the absence of raw materials and a drop in demand will deal a significant blow.
A reduction in demand majorly impacts the auto industry and consumer durable goods. Other industries like cement and steel that did well last fiscal year will stumble this year as infrastructure, and other allied activities are halted across the country.
Services
The services industry was once seen as the sunshine industry of the country. It had spearheaded the nation’s economy all through the last decade and even before that. With other segments taking a hit and a reduced national and global demand, service companies in India would be forced to consider layoffs and other cost reduction measures to stay afloat.
Real-Estate
The fall in demand will be sharper for the real estate industry that has already been in trouble in the last couple of years. The number of incomplete and under-construction projects will mushroom all across the country.
The Road Ahead
While the situation may seem bleak right now, one can be sure that there is light at the end of the tunnel. A word of advice for all companies – remain patient and things will get better soon. Right now, all we can hope is that we survive this lockdown period and emerge stronger by curbing the spread of the virus in the country. Once we eradicate the possibilities of community transmission, we can hope that – we can get back to business as usual.
Here’s a look at how the Covid-19 outbreak has impacted a few of the major sectors.