From Slowdown To Lockdown, How India & Indians Are Facing Issues One After Another.

0
930

India has seen an economic slowdown in 2019, with the country’s real estate, automobile, construction sectors and overall consumption demand facing a serious and constant decline. All this kept on piling up and ended with one big boom, the coronavirus pandemic which has resulted in the lockdown of 40 days.

The second quarter (July-September) of the current financial year (April 2019-March 2020) witnessed a drastic fall in gross domestic product (GDP) growth rate to 4.5 percent, even as international bodies like the International Monetary Fund (IMF) and the World Bank repeatedly cut Indian economy’s growth rates. This was described as the lowest GDP growth rate in the previous 26 quarters, which means in over six years.

The main reasons attributed to the fall in the GDP growth rate were -contracted manufacturing activity, weakened investments, and lessened consumption demand.

In the words of former Governor of India’s central bank, the Reserve Bank of India (RBI), Raghuram Rajan, there are signs of “deep malaise” in the Indian economy.

“Growth is slowing significantly and there is currently little fiscal space available to the government to spend more. Corporate and household debt is rising and there is deep distress in parts of the financial sector. Unemployment seems to be growing,” he was quoted as saying by the Indian media.

“Repeated government allusions to the 5 trillion U.S. dollars economy by 2024, which would necessitate steady real growth of at least 8-9 percent per year starting now, seem ‘increasingly unrealistic’,” he added.

Rajan, the RBI Governor between 2013 and 2016 and now the Professor of Finance at the University of Chicago Booth School of Business, called for reforms to liberalise capital, land and labour markets, and spur investment as well as growth.


The Indian government’s moves during the past two-three months failed to revive the sluggish economy, even as the business sentiment remained at one of the lowest. The automotive sector faced its worst phase, and the same was experienced in the reality and manufacturing sectors.

Finance Minister Nirmala Sitharaman announced over 30 steps in various sectors to reverse the downturn, but none of them seemed to have worked, even as it is feared that the decline might soon reach the 3.5 percent-mark.

The country’s real estate sector witnessed one of the poorest years, faced with poor housing demand. As on date, according to rough estimates, there is an unsold inventory of around 450,000 housing units.

There has been a strong push by the central government for affordable housing, which accounts for nearly half of the total residential housing sales.

1. Cement Industry
With several states calling for a lockdown in multiple districts, it is a partial shutdown for India’s cement and capital goods sector. While companies are yet to assess the financial losses, they do not anticipate immediate shortage or delivery issues.

Most major capital goods companies in the country have shut down facilities in districts where a lockdown has been announced. The country’s largest engineering conglomerate Larsen & Toubro (L&T), according to sources, has completely shuttered its Mumbai facility in Powai and is operating Hazira at bare minimum.

L&T’s Hazira plant in Gujarat is a bigger facility spread over 34,500 square metres with modular fabrication facility, as well as heavy
engineering, defence and shipbuilding, and power equipment manufacturing facilities.

2. Hotel Industry
The cascading effect of the coronavirus (Covid 19) pandemic will cost the Indian hospitality industry losses to the tune of 620 crore. The hotel chain and standalone hotel segment is staring at losses over 130-155 crore, whereas the alternate accommodation segment is likely to make losses of over 420-470 crore. Layoffs of ‘casual staff’ or ‘contracted staff’ is likely, a research suggested.

3. Restaurant Industry
The National Restaurant Association of India (NRAI), which has more than 500,000 restaurants from all over the country under its umbrella, has advised all its members to shut down dine-in operations.

The shutdown lasted till March 31 will eat up the major chunk of losses for this sector. This has been done as a preventive measure against the spread of the coronavirus.This move by the NRAI will have a drastic effect on the day-to-day operations of thousands of dine-in restaurants, pubs, cafes, and bars.

“We have taken a decision of advising members to close all restaurants starting tomorrow across India. Severely hit by the coronavirus pandemic, Indian restaurant body, National Restaurants Association of
India (NRAI), is seeking a financial bailout package from the Finance Minsity for the food service sector.To mitigate the health risks at restaurants in the wake of Coronavirus, NRAI had issued an advisory to all its members to shut down their dine-in operations till 31st March, 2020. The value of the food service industry in India is estimated at 4,23,865 crore.

4. Retail Industry
The coronavirus pandemic amid an economic slowdown has hit revenue at Indian retailers selling non-essential items like clothes and jewelry by 75% so far and is likely to cause widespread job losses, an industry body said on Monday. About 40% of the six million employees working in India’s modern, rather than traditional, retail sector could likely lose their jobs in the next four months if the government does not intervene, Kumar Rajgopalan, chief executive, Retailers Association of India (RAI), told Reuters.

“Unless the government provides some relief, revenues will slide by 90% in the next six months,” Rajgopalan said, suggesting moratoriums on the payment of loans, and on the payments of the goods and services tax (GST) and other government duties. The RAI represents 500,000 stores in India, including brands like V-Mart, Shopper’s Stop, Future Group and Avenue Supermarts, which operates the grocery chain D-Mart. 

On Sunday, Future Retail, which owns hypermarket Big Bazaar, said the pandemic, has resulted in a “degrowth of revenue”. “The expected impact of COVID-19 as of now is hard to ascertain,” it said in a filing to the exchanges on Sunday.

5. Iron-Steel Industry
As China returns to work after the Lunar New Year holiday that got extended due to the coronavirus outbreak, the Indian steel industry will be hoping that the world’s largest maker and consumer of the metal gets back to business as soon as possible.

The outbreak of the virus, having claimed over 1,000 lives in China, has forced the country to pause much of its economic activity, including the construction of roads, bridges and buildings. The transportation sector, too, has gone on a slow mode. These sectors are the main consumers of steel.

A downward trend in prices will be bad news for the likes of JSW Steel and Tata Steel, who saw their profits plunge in the third quarter of the financial year. JSW Steel’s profits plunged 88 percent, and Tata Steel suffered losses of Rs 1,229 crore in the third quarter. Fall in rates will especially hurt as steel prices had just started going up in the last three months; and will definitely impact profitability.

6. Oil And Gas
Global oil demand is expected to decline in 2020 as the impact of the new coronavirus (COVID-19) spreads around the world, constricting travel and broader economic activity, according to the International Energy Agency’s latest oil market forecast. The situation remains fluid, creating an extraordinary degree of uncertainty over what the full global impact of the virus will be.


In the IEA’s central base case, demand this year drops for the first time since 2009 because of the deep contraction in oil consumption in China, and major disruptions to global travel and trade.

“The coronavirus crisis is affecting a wide range of energy markets – including coal, gas and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving
around, dealing a heavy blow to demand for transport fuels,” said Dr Fatih Birol, the IEA’s Executive Director. “This is especially true in China, the largest energy consumer in the world, which accounted for more than 80% of global oil demand growth last year. While the repercussions of the virus are spreading to other parts of the world, what happens in China will have major implications for global energy and oil markets.”

The IEA now sees global oil demand at 99.9 million barrels a day in 2020, down around 90,000 barrels a day from 2019. This is a sharp downgrade from the IEA’s forecast in February, which predicted global oil demand would grow by 825,000 barrels a day in 2020.


7. Automobiles & Auto Components
The automotive industry is expecting a loss of 7.5 lakh units in production and $2 billion in revenue in March alone because of the lockdowns to combat the Covid-19 outbreak. Despite the tough business environment, several automakers we spoke to, said they would not lay off any permanent or temporary workers. The government has also told India Inc to not cut jobs or salaries.

The Indian automobile industry is likely to suffer an estimated revenue loss of around Rs13,000 crore to Rs15,000 crore due to the coronavirus outbreak.

8. Gems And Jewellery
The Surat diamond industry is likely to face a loss of around Rs 8,000 crore in next two months as Hong Kong, which is a major export destination, has declared a state of emergency due to the coronavirus outbreak in China, say experts.

Hong Kong is a major business hub for the Surat diamond industry, but schools and colleges have been closed there till the first week of March and even the businesses are seeing a dip in view of the outbreak of the novel coronavirus.

According to Gems and Jewellery Export Promotion Council (GJEPC) regional chairman Dinesh Navadiya, polished diamonds worth around Rs 50,000 crore are exported from Surat to Hong Kong every year.

“That’s around 37 percent of the total exports from here. Now, due to coronavirus scare, Hong Kong has declared a month-long vacation. Gujarati traders having offices there are coming back to India,” he said.
Following the coronavirus outbreak, the gems and jewellery sector in the country has come to a standstill with retailers managing to do only 20-25 percent business due to fewer footfalls amid fear of the virus’ spread, according to an industry body. “There is virtually no footfalls in jewellery stores and retailers are doing only 20-25 percent business across the country,” All India Gem And Jewellery Domestic Council
chairman Anantha Padmanaban told

9. Consumer Goods
Consumer goods market for essentials, groceries, household products, smartphones and electronics are seeing further moderation in growth, belying expectations of a revival during quarter ended March.
The fast moving consumer goods (FMCG) market grew 1% during January, a sharp fall from 2.4% the same month, a year ago according to a latest study by Kantar Worldpanel, a global consumer research firm owned by communications and advertising giant WPP. In fact, unlike previous quarters where slowdown was largely led by rural markets, latest data revealed that urban growth, at 0.2%, dragged down the entire segment even as hinterland consumption remained that same at 1.8%.


10. Transportation

The world’s biggest lockdown has brought transportation of goods in the country close to a halt, even though the government has exempted the sector from restrictions to halt the spread of coronavirus.

According to Pranshu Kacholia, VP Business, ClickPost, data between March 10 to 20 shows that compared to the average for last month, the outbreak and the subsequent lockdown across states resulted in stuck shipments increasing by 9%, order delays were up by 21%, and delivery percentage has seen a clear decline of 9%. What is interesting is that this data pertains to the period before the nationwide lockdown started on March 25, which means these numbers would be way worse.

11. Aviation

With no signs of a government financial assistance plan, India’s now-grounded aviation sector lies perilously close to bankruptcy as a result of the COVID-19 pandemic. SpiceJet, Vistara, IndiGo and GoAir have told passengers that their bookings for travel upto May 3 were cancelled and that their entire amount will be secure in a “credit-shell” which can be used to re-book travel later in the year or early next year. ”In the event of a 3-month shutdown, the two listed carriers alone – IndiGo and SpiceJet – could report combined losses of USD1.25-1.50 billion across 4QFY2020 and 1QFY2021.”

A wish-list for Indian airlines looking to survive the coronavirus storm could include support for salaries, an exemption of airport charges, a reduction on the excise duty on Aviation Turbine Fuel (ATF), bringing ATF under the Goods and Services Tax (GST) regime and suspending infrastructure charges at Indian airports. With revenues disappearing, IndiGo, GoAir and SpiceJet have already announced steep across-the-board salary cuts. GoAir, which has begun terminating the contracts of its expat pilots, has also asked its staff to go on temporary leave without pay on a rotational basis.

12. Textiles, Apparels & Accessories

In august 2019, the textile industry was facing serious issues. The Indian cotton-spinning sector was in dire straits and is facing a crisis not seen in the past one decade, according to an apex body representing the industry. The Northern India Textile Mills Association (NITMA) has said that textiles industry was facing slowdown, which has forced spinning companies to cut down their production and shut down their mills, resulting in huge job losses. Export of cotton yarn fell by 34.6% to $696 million as compared to $1,063 million in 2018. 1 crore jobs will result in cut due to the pandemic. This sector will see a huge amount of misery in the upcoming months. The already existing slowdown will not help the situation and will only deplete it.

13. Real Estate

Ratings agency says the ongoing liquidity crisis and weak consumer sentiment continue to hurt housing demand in major cities. The stimulus packages provided by the govt for the sector does not provide much hope, says the report. Credit rating agency India Ratings and Research (IndRA) on Thursday said it has maintained a negative outlook on the overall real estate sector for the next financial year 2020-2021 as the ongoing liquidity crisis and weak consumer sentiment continue to hurt housing demand in major cities. “The market share of the top 10 listed players gradually doubled to 13% in FY20 from 7% and 6% in FY18 and FY17, respectively,” it said, adding that the trend is expected to continue for FY21 as well.

14. Entertainment & Lifestyle

The Indian media industry has tremendous scope for growth in all the segments due to rising incomes and evolving lifestyles. Media is consumed by audience across demographics and various avenues such as television, films, out of home (OOH), radio, animation and visual effect (VFX), music, gaming, digital advertising, and print. Animation and VFX industry in India reached Rs 87.7 billion (US$ 1.25 billion) in FY19 at a CAGR of 18.7 per cent. It is expected to grow at a CAGR of 16 per cent till FY24 and reach Rs 184 billion (US$ 2.63 billion). India ranked at 15th in the world in music industry and is expected to enter into the top 10 music markets by 2022. Newspaper readership in India has increased by 4.4 per cent to 425 million in Q1 2019 from 407 million in 2017. This is believed to go down in the next quarter because of the extreme crisis we are facing for covid-19.

Plenty of issues exist in India’s financial crisis which might come. From the start of 2019’s depletion of reserves in mere statue building and riots to huge companies closing down operations in October, all will contribute to the recession which might come.

Lack of planning on the governments part, corruption and the hay wired standards have led to this unbeatable heinous era which might come.

READ  Uber doubles down on trucking venture, will invest $200M in new Uber Freight Chicago HQ

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.