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BW Businessworld

The Coronavirus Impact– Is India Heading Towards A Slowdown

With the Government stepping in and taking the situation under control, one can be sure that people and businesses can get back to normalcy in a couple of months. Till such time, the dictum for the day would be to follow advisories and stay safe.

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India is the world’s fourth largest economy by nominal GDP, and the third largest by purchasing power parity. It is the world’s sixth largest consumer market where more than 60% of its GDP is driven by domestic private consumption. The service sector makes up for more than 55% of its GDP and provides employment to around 27% of the Indian workforce. The service sector consists of the production of services instead of end-products such as aviation, retail, tourism, entertainment amongst others and has been badly hit by the recent outbreak of the Novel Coronavirus (COVID-19) in India.

Coronavirus is a new strain that has not been previously identified in humans. The Coronavirus usually causes illnesses ranging from the common cold, to diseases such as the Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). Globally, around 116 countries are facing the wrath of the virus with more than 10 reported cases in each country. India is one among the 116 countries and there is a sudden rise in the number of positive cases. The current situation has forced the central and state governments to take several precautionary measures. The safety measures and the social restrictions mandated by the Government has brought consumerism to an all-time low with people staying at home. Restaurants, malls, movie theatres and even schools & colleges remain closed across the country.

The BSE index has fallen to over 30% since February 2020 after the COVID-19 cases started coming to light, clouding the outlook in the last quarter of FY 19 – 20 for Indian businesses, especially in the service sector, and posing a risk to the great Indian growth story. The Google search activity around topics such as recession has increased drastically indicating the public sentiments after the confirmation of first positive case of COVID-19.

The Coronavirus Disease strain that has started spreading since December 2019 (COVID-19) in mainland China, since its discovery, has been a deterrent for the Indian Economy. India is a net importer of Chinese products with the lion’s share being  electronic components at 67% and consumer durables at 45%.  India is also heavily dependent on Chinese imports to make medicines — the APIs (active pharma ingredients) and other components that go into manufacturing. As the pandemic continues through the first quarter of 2020, imports have been hit as many factories in China were not operational and this may lead to a short supply of the major components affecting the manufacturing activity and could be the first indication of the  disruption caused by the virus in India.

Travel & tourism sector is facing one of the worst crises ever due to COVID-19, impacting all segments – inbound, outbound. domestic and international travel. The contagious nature of the virus has forced the government to put severe travel restrictions in cities, including visa cancellations and border shutdowns which may force the industry into exponential levels of slowdown.  With this trend, the situation may worsen in the coming time. Airlines and Railways are already ailing due to high levels of ticket cancellations and hotels in high-density tourist destinations are laden with empty rooms. burning a deep hole in the pocket of the hospitality sector players. Travel and tourism alone accounted for 9.2% of the country’s GDP in 2018 generating around 26.7 million jobs. Under the current situation, this obviously is going to take a big hit and cause an impact worth thousands of crores of rupees.

Retail outlets are on the front line of COVID-19 impact. With people staying at home, and stores being closed, the supply chains are stalled following the government orders of the closures of malls, restaurants, multiplexes and pubs. Online markets seem to show an uptake because consumers are home bound and deliveries are still manageable with social distancing and safety measures.

But for many of retailers, this outbreak could be a delicate turning point as the disruption caused by the virus can deplete funds that were set aside for investing in building new capabilities. In the coming weeks, economic data will reflect the virus’ effect, but of course, the length and depth of the aftermath of the virus will determine how much it throws the Indian retailing scene off course.

The economic disruption caused by the virus is real - however, the specific effects on the different industries will be more visible in the coming few months. The biggest challenge is that we are still unaware that how long the curbs and regulations would last. With the Government stepping in and taking the situation under control, one can be sure that people and businesses can get back to normalcy in a couple of months.  Till such time, the dictum for the day would be to follow advisories and stay safe.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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COVID-19 coronavirus outbreak

Aishwarya Vasudevan

The author is Group COO, Neuberg Diagnostics

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