So COVID 19 has brought not just India but the entire world to almost to a standstill with Lockdowns across countries. This pandemic is not just a health impact on countries but there is also an economic impact on the world economy.
It looks like the world is moving towards a recession, is India fairing better than the other economies of the world. I believe yes.
Here is my take on the impact of COVID 19 on the Indian economy. It is after a lot of research that I have been able to come up with the points listed below.
The General Outlook
1. India seems to have kept the curve flat so far. We might escape the worst of the pandemic, but will have to be cautious about it. What matters most is when is the lockdown ending? If it ends on the 3rd of May, do we all ensure that the social distancing and the masks and other advisories issued by the government to curtail the spread is followed or not.
2. The Curve in India could look like an M – i.e. We are already seeing the kind of Havoc the contagion has created across the world, however there is a good chance of re-occurrence of the virus. With restrictions easing, asymptomatic people could again spread the virus and the curve may again go up. Which means there could be a possibility of regular lockdowns. Businesses need to plan accordingly.
3. Money will flow to countries that are less battered. Western economies are badly hit while countries like India, Indonesia, etc are somehow managing it much better. This could lead to global capital flowing into India. What is required is for the businesses to manage the restart efficiently.
4. Emotional and Economic backlash against China has already started. Trump has been openly speaking, UK & France have also spoken and the latest is Germany… sending an invoice of 130 Billion Euros. Countries and organisations are already working on strategies to pivot away from China. China has been the supplier to the world for a long long time now. Japan Government has announced packages for its companies to bringing back manufacturing. This opens up a huge opportunity for India… Businesses need to keep this in mind and work accordingly.
What would the impact be on Spending?
5. With so much uncertainty and not much clarity in the near future (6-8 months), people will be very discrete in their spending. So the average ticket size across the board may come down quite a bit. There would also be a delay in spending on non-essentials and definitely aspirational buys.
6. During this lockdown there has been a shift in the buying habits in general. Large percentage has moved to online shopping. This shift may become permanent for a large chunk so there would be an acceleration in the digital economy. Much higher growth than what we saw during the demonetisation period.
7. Insurance industry in India could see a lot of activity. Individuals will invest in health and safety and it may become No.1 on their agenda. There will be more spending on this area and a reduction in other discretionary spending.
8. The expensive brands may take a hit and their business may shift to brands that offer quality along with aggressive pricing.
Let’s talk business in general.
9. There would be winners and there would be losers who would emerge out of this crisis. Businesses that have started working on Post COVID era (or would start in the next few weeks) would be the clear winners. Strategies need to be reoriented. Businesses know that… still there would be a percentage of business that would not take the right action and would become the losers.
10. As a facilitator, I have been a staunch supporter of strong open communication. This is the time to take this very seriously. Strong, open, transparent & right communication with the right stakeholder.
11. Business across the board would need to be prudent/ be frugal. Cash burn, even for the most promising start-ups would be considered a sin if it does not result in an improving/ seemingly improving bottomline.
12. Businesses that keep a hawks eye on their costs could be the winners. There would be good costs and there would be bad costs. Protect the good and eliminate the bad (that has always been the universal truth).
13. Businesses that may take a hit
- Restaurants (because people will take time to move out and the restaurant would have to take care of social distancing)
- Businesses with big ticket items (cars, homes etc)
- Industries that cater to gatherings.
- Cinema halls.
- Small retailers
- Businesses that are directly or indirectly related to parties (weddings, birthdays etc)
- Businesses related to oil. (with US oil futures falling below $0 a barrel at one point on the 20th of April 2020)
- Wholesale suppliers and shops in big markets (not malls)
14. Businesses that could thrive
- Companies that provide quality products at lower price points.
- Online education and training
15. Offices would go virtual for a huge percentage of employees. The forced work from home would become a new normal for a lot of employees.
And let me end it with a couple of good notes…
If India can pull it off, as it seems at this moment, it would be an opportunity that we have not seen in decades and would not see in decades to come. We would be to the world, what China is today… The Supplier to the World…
A survey by McKinsey entrepreneurs released few days ago, 53% of Indian entrepreneurs are optimistic and that is the key.
However, things are not normal yet and there is still pain ahead… the road to recovery is long and hard and painful… but we will come out a WINNER!
SO BRACE FOR IMPACT! STAY SAFE! STAY HEALTHY!
*I strongly believe this would happen however I could go wrong. These points are entirely based on my research, my understanding and my belief.