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BW Businessworld

COVID-19: A Juddering Halt To The Human Progress

There needs to be differentiated approaches of lifting the lockdown such as rural vs urban, industrial vs the service, heavily infected vs not infected. Prior lessons learned in India from the repurpose and redeployment of the skills needed nationwide during natural calamity and floods.

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What has happened to the world –Peacocks dancing on the streets, silence in the skies, empty malls, bells at halt in the temples. This seems to be the new normal. Yes, a pandemic has hit the human race that’s fighting for the survival .Our minds  struggling to accept the new reality still racing back and forth trying it’s best  to  get back  to the normalcy .But there is a halt  and a rupture and it’s real .We are trying best  to stitch our future to the past refusing to accept the rupture. But the rupture exists that has disrupted the human race across the globe in every possible way resulting in a ‘lull’ instead of a normal vociferous aura in the cosmos.  

The insidious virus that originated in China has given a shape to a global pandemic. The invisible enemy has already taken a toll on the human life that can barely be condoned by humanity across the borders and geographies. It is estimated about 280000 people have already succumbed to this virus globally.  USA which gloated of spending $ 2 trillion on upgrading military equipment for an exalted dominance   lost more than eighty thousand human souls bringing its economy to halt. This epidemic is truly global in nature with its impact felt across borders, macros and prosperity under stress. The financial markets rattled at nascent stages of the crisis plummeting over 30 percent to rebound again with the stimulus offered by the government. There have been a capital outflows resulting the depreciation of certain currencies. This epidemic is turning to be economic scourge with global negative impact. The projected growth rate in 2020 for USA is – 6 percent. The eurozone is expected to grow at – 7 percent. The only positive growth is likely for India at 1.9 percent for 2020 and china at 1.2 percent. The Macro numbers clearly indicate it’s the worst economic crisis since the great depression of 1930s. However, the IMF projections for 2021 for both the developed and developing economic offers some relief with rebound in positive figures for USA and growth rate as high as 7 percent for India and 9 percent for China. Per capita incomes are expected to shrink in 170 countries. 

The immediate impact of the epidemic which doesn’t seem to be transient in nature can be felt in the form of the deteriorating wages, rising health care costs and the record high unemployment. There has been a complete disruption in the trade links and supply chain. The human cost due to the virus has been alarming due to absence of any medical cure through vaccine. As a result the countries have proscribed free movement of its people  through imposing  lockdown with  travel restrictions , closure of non-essential businesses , schools and religious places .People are forced to get into quarantines for two weeks with even slight symptoms of the virus  .There have been reported violence and unrest  in certain developing countries with immigrants being stranded without food , money and shelter .People are forced to walk back to their native villages 100 miles .The resilience capability and robust medical infrastructure would play a pivotal role during this epidemic. The targeted strategy needs to focus on poor labourer, old people with weak immune system can save myriad lives. The relief fund is the only solution to help the needy with preventive coping strategy but bound to be onerous on the government. Targeted assistance would support many out of work with no saving or medical insurance. It is imperative to build the social net as quickly to save severe casualties.

At such critical times MNCs such as LVMH and Zara have agreed to manufacture sanitizer and masks respectively. N 95 respirator masks and Hazmat suits with standards laid by the government are being manufactured but currently they are in short supply especially the testing kits and the government is trying its best to procure them as soon as possible. Currently the infection rate per million is lowest in Indian. In Singapore the technology contact tracing app ‘trace together’ to a great extent reduced the dependence on the memory. It identifies people who have been in close proximity within two meters for almost 30 minutes. The private sector can also support the virtual medicine effort to offload the hospitals and use the telemedicine facilities for the remote monitoring of the low or mid risk patients. When patients can’t visit doctors the technology digital-enabled tools can be of great help to avoid follow up with the doctors. The crisis has truly acted as a catapult for the adoption of the digital. 

There needs to be an apt Trade-off between livelihood and life. Western countries continue to spend generously on the health systems. But there are resource constraints with it comes to highly populous country such as India. The need of the hour is the widespread testing, procuring the medical supplies and assuage the impact of the virus through containment measures. The collapse of demand resulting in zero cashflow has brought the global economy to its feet. Government should practice the best fiscal and monetary policy that suits their country. India already announced its measure to help the industry and masses by allowing deferment of loan instalment for at least three months. Credit guarantees, liquidity facilities and expanded unemployment benefits, loan forbearance and tax reliefs for the businesses is bound to offer some relief. The support facility during the containment phase is expected to ease the stress due to the lockdown resulting in loss of revenues and exorbitant stress on the life and livelihood with the subdued investments. It is observed that government has also adopted an approach of opening specific sectors. But such measures would not be affective since industries are interlinked. Take an example of textile industry an export-oriented would require collaborative work from chemical, paper and plastic for packaging and consumer-based thread would be used as raw material for the sewing industries. Also auto sector to a great extent rely on the retail and distributors who are shut at the moment in the red zones. The entire value chain needs to be considered before coming up with any policy measures. 

On  12th May 2020 PM Modi announced Rs 20 lakh crore economic package to fight the coronavirus scourge and at the same time build up the economic resilience for years to come. The core to the speech was to make India a self-reliant country with hedge from international disruption in the global supply chains. The focus is to promote local business through vocal communication strategy. The five-building block to the package would be Economy, Infrastructure, Technology-driven System, demand and demography. This would complement with able land, labour, law and liquidity reforms. All segments of the ecosystem would benefit from this package be it large Industrial group, Micro and medium-size industry, farm, labour, and local businesses. The industry bodies such as FICCI and CII welcomed the announcement offering much-awaited relief by the   damage done through the epidemic. 

Mr. Narendra Modi, Prime Minister of India is a staunch believer that this crisis is here to stay and hence fighting this invisible enemy would require entirely different well-calibrated approach with intrepid wit. The virus is ubiquitous and hence this fight needs to be fought with resolve taking together all the strata of the society. The enormity of the current damage due to the hiatus in the economic activity may be complimented and offer oxygen to millions through this much-awaited economic relief package for the country.

Initially the IMF has pledged $1 Trillion lending capability, Asian development bank 100-billion-dollar relief package. Other developed countries have committed their own relief package USA being highest at USD 2.5 Trillion. The impact would be felt only through rapid disbursements of funds targeted to poorest countries. The deleterious consequence of the virus is being contained through social distancing measures, contact tracing and maximum testing. The current economic situation is precarious and success to a great extent would depend on the ability to execute the targeted containment measures easing out the pain due to the virus. One of the other critical factors would be execution at scale with recalibrated data that is reliable. Courageous actions of the doctors and nurses should be appreciated during the crisis who cope with the extreme poignant environment of humane misery. 

Industry convergence involving the regulatory regimes, technology and geopolitical uncertainty would prevail for the unforeseen times to come. Looking into the post-crisis the success of companies to a large extent depend on the ability to allocate capital through decisive prioritization, measuring the capital efficiency and returns more effectively. Reorientation of the workforce who have been enervated with the virus is the need of the hour. Rigorous reviews, challenging the internal assumptions and exploring the fundamental questions about the operating business models and future of the business would be utmost important given the enormity of the uncertainty. 

There is a lot of talk about flattening of the curve. But with this the egregious impact that the virus has already done can’t be undermined. This would require   longer time frame to contain the virus. Since this approach is attained through complete shutdown of the economic activity. CEOs should synchronize the company resources and investments analysing how the recovery is evolving over period of time. Various types of known recovery pattern or ‘shape’ namely V, U or L. Currently china is witnessing V shape recovery which means sharp downward plunge followed by sharp rebound something that resembling normal levels of business. It is observed that Singapore, Japan, Korea and Hong Kong followed the V shape recovery path. While UK and Europe are pursuing measures to flatten the curve.

It is questionable if the consumption would return to its normal in the near future given the precarious nature of the invisible enemy   .A lot depends on how soon old consumption patterns emerge such as people attending events in masses , retail shopping , crowded entertainment complexes .Or the alternative could be they adopt new ways of consumption via online giving ways to new opportunities for the new apps and online portals .New sectors such as health and wellness would be in great demand .A lot also depends on how the business embrace the new supply chain business models and it’s safeguards to the precarious environment . Traditional marketing and promotion and physical events are bound to undergo 360-degree shift. Travel industry has taken the maximum hit due to this crisis. The companies need to reorient their business models with alternatives new revenue streams to sustain in the post-crisis world. Health care cost would lead ways to the emergence of innovations in the insurance industry. Indian government has already announced insurance of Rs 50 lakh to government employees in government hospitals who scumble to this virus. It is the duty of a leader to seize the moment of truth that the crisis will disrupt the future of business and those who adapt to the emerging trends will survive. 

 Success to a great extent would depend on robust supply chain strategy. Many of the US and European countries have already started to move their sourcing base from China to SE Asia with the objective to decentralize the supply chain. It is highly advisable to have proactive optimized distribution channel. This would enable to have right inventory levels and appropriate inventory mix based on the accurate demand forecasting and it avoids major problems such as bullwhip affect and to determine the alternative optimal sourcing strategy. The advantage is exactly knowing which alternative place and the supplier to order from and how much of order to meet during the uncertain demand keeping the optimization of the cost in mind. 

The robust crisis response will determine how many companies would survive this epidemic with virus seemingly rancorous to humanity. A study carried out by a Tier 1 global strategy consultancy firm suggest success would depend on three important pillars namely team health and safety, business strength and resilience. These pillars must have an excellent execution clarity. The team and the health safety must rely on compliance with the regulatory requirement, boost moral through stress reduction support those who may be infected and the reduction of the risk of transmission. The second pillar that is the business strength should focus on the preservation of the top line to and trust-building with the customers .Capability should be built to enforce the ability to supply .It is extremely important to adapt resources to meet the business needs .There should be appropriate response to the market competitive dynamics through accurate monitoring .Appropriate scenarios must be prepared to recuperate and bounce back .The third pillar financial resilience to a great extent depend on manging cash to ensure appropriate level of the liquidity .The financial plans must be revised by performing scenario-based stress testing . Erudite sense of cost discipline is also mandatory. All these three pillars depend on the execution clarity. There should be appropriate level of the coordination with the scaled response and through adaptive planning. The team should be empowered through engaging the organisation leading with purpose and integrity. Nobody foresaw this global health crisis. Hence understanding the evolving industry ecosystem credulously spotting the emerging trends and challenges will safeguard current operations through decisive investments. 

There should be three roles of fiscal policy during the COVID 19 crisis namely fighting the infection, disaster relief and support of the aggregate demand. Success in getting over the current pandemic to a great extent depend on the accurate information sharing be it about vaccine, efficiency tests, medical resources and flattening the curve through appropriate containment measures. Fiscal measures would allow the available funds to percolate to the lowest strata of the society through financial risk-sharing and public-private coordination. 

Liquidity risk require urgent attention as the payments have frozen due to rupture in the supply chains. The remedy would be to stretch the liquidity coverage ratios to ensure that there is depositor confidence. There needs to be differentiated approaches of lifting the lockdown such as rural vs urban, industrial vs the service, heavily infected vs not infected. Prior lessons learned in India from the repurpose and redeployment of the skills needed nationwide during natural calamity and floods. For this epidemic  recently 700 officers from the govt across the country have been deputed and this is truly a calamity with no boundaries 

Hence it is imperative that there is delicate balance between the livelihood and life. With concerted effort of structural measures , monetary and fiscal and effective way to return to normalcy post the lockdown would maintain the sanctity of human life and most important tenets .This would also prove the resilience and collaborate effort to fight problems breaking the barriers of caste, creed, religion or political parties. 

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 Lockdown situation

Divakar Prakash

The author is a Strategy Consultant with experience of consulting CEO level executives and key stakeholders in Real Estate , Government, Not for Profit, FMCG and Chemical sectors. Educated at the School of Management ,University of St-Andrews consistently a top ranked institution in Europe at Master's level in business Strategy, Corporate Finance and General Management

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