With all the job losses and slowdown in hiring that is taking place across sectors, it is official that the world has entered into a recession. According to IMF Managing Director, Kristalina Georgieva the world has entered a recession as bad as or worse than in 2009. The IMF chief further said that 81 emergency financing requests, including 50 from lower-income countries, had been received, and the current estimate for the overall financial needs of emerging markets is $2.5 trillion. The Coronavirus pandemic is going to have a much larger economic impact than anyone has anticipated.
As far as India is concerned, the country's already-slowing economy has weakened to at least an eight-year low this quarter and will slow down even more sharply in the next six months due to the global Coronavirus pandemic, according to a Reuters poll. The economy was forecast to grow 2.0% next quarter and 3.3% in the July-September quarter. The impact of Coronavirus is being felt at multiple levels and across industries. The automobile industry, which was already reeling under a slowing economy, is seeing further fall in sales. Similarly, the retail sector is running cash dry with virtually no sales and store shutdowns. The consumer internet businesses like food delivery, online pharmacy, and so on are also feeling the pressure to some extent as there are now certain restrictions on deliveries too. The global pandemic, therefore, has a multi-fold impact on the Indian economy as well.
Why the Coronavirus Pandemic is Expected to Hit India in a Major Way?
In India’s case, firstly, the largest demographic that gets hit due to this global pandemic is the millions of migrant workers. These are the workers that depend on daily wage and move to big cities for work. It is very hard for them to maintain social distancing, meet their ends and afford healthcare. Secondly, when it comes to businesses, SMBs get hit a lot because without any operations it will be hard for them to pay rents, salaries to the employees, bank loans and other bills.
This will have a trickledown effect on consumer spend as well. Thirdly, any economic activity that requires physical interactions will see a huge changeover for quite some time in the short term. This would impact sectors like restaurants, retail shops, tourism, hospitality, transportation, gyms, sport, and entertainment-movie theatres, concerts among many. Most of the economic activity will move from the physical to the digital space. This transformation requires reskilling for many migrant and gig workers. Although this would be a costly activity in the short-term but will have a huge upside in the long-term.
Based on multiple reports it looks like the World will be fighting the Coronavirus pandemic for at least the next 6 months. This means the economic downturn will continue for a year or so, and there may be no appetite for novelty items or fashion and no new capital investments from consumers. This will hit all the non-essential industries like fashion and asset markets like real estate. This may also lead to bankruptcies of SMBs, and start-ups going bust. The products that have digital experience like tele-medicine, online grocery delivery, online food delivery, video calling, e-learning, e-test taking, etc. will see a huge demand.
This is a unique time, probably once in a 100 years scenario. Businesses have a responsibility to act thoughtfully as according to various predictions and studies, the economy might be stagnant for a long time now.
By Maruthi Medisetti, CEO and Co-Founder, MetroMedi