The current Corona outbreak has adversely impacted the
Indian economy as a whole at least for short to medium
term.
1) Falling domestic consumption
Consumption of non-essential items is expected to go through a
“steep” reduction curve in this quarter.
These include transport, communication services, consumer durables
like TVs, Freeze, ACs and other domestic appliances, Tourism, spends on
recreation and culture, hotels and restaurants, Business and social travel, and
even education and skilling. Other un-organized sectors like an event planner,
caterers etc and many more
Weak domestic consumption and consumer sentiment will have firms delay their
investment, which will, in turn, put additional pressure on growth.
With increasing job losses and pay cuts across industries,
non-essential spending will be hit further, and big businesses will be affected
eventually.
However, essential items like food, alcoholic beverages, tobacco,
clothing, footwear, soaps, detergents, housing, gas, electricity, routine
household expenditure, and healthcare services, will continue to gain in the
short term.
But, the sustained disruption of domestic supply chains and the
increasing non-availability of these items on time and in some specific
geography will lead to inflation in the mid-to-long-term.
2) Impact
on informal economy
In just a few days of the lockdown, the
internet was flooded with heart-wrenching images of India’s migrant workers
fleeing big cities to their native lands The elite concepts like “social
distancing” and “stay at home” largely reversed. Even though the government has
announced a Rs 1.7 lakh crore relief package under the Pradhan Mantri Garib
Kalyan Yojana for migrant workers and those below the poverty line, the situation doesn't improve significantly due to extended lockdown.
Labour force surveys indicate that 37 percent
of salaried employees in urban India are informal workers engaged in
non-agricultural sectors. They are faced with uncertainties and job losses due
to the complete stalling of industrial and economic activity in places like
Maharashtra, Gujarat, Delhi, Punjab, and Rajasthan.
“The income shock to migrant workers has
resulted in a massive reverse migration, the effects of which will only unravel
overtime,” KPMG says.
3) Impact
on MSMEs
Because of rising uncertainties in contractual labor, MSMEs also stand to be
impacted. Exports, which account for a large volume of MSME earnings, are
expected to fall as the US and Europe are reeling from the impact of the
coronavirus. Even post lockdown also the impact will cascade due to
global slowdown in demand. Wage labor will get impacted more leading to
layoffs, unrest, and lowering of purchasing power,” KPMG adds.
Add to this all, current reverse migration of labor from the state like Gujarat, Maharastra, Delhi-NCR will load additional burden on MSMEs in restarting of the business post lockdown.
But these all are short to medium-term difficulties and hurdles. Citizens of India are having higher EQ and our culture is more relationship-based. Mutual faith and support in the business relationship, Employer-Employee relationship, and supplier-customer relationship will help us to sustain our business and win in the long run.
Jai Hind.
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