Introduction
Because ofthe Covid pandemic, the trade and industrial world has seen the biggest disruption since WWII. Due to the lockdowns enforced by various governments across the world post-viral outbreak, industries came to a grinding halt, freight movement ceased, construction came to a standstill, supply chains snapped and passenger movement stopped. Millions of people lost jobs and,today, cannot pay their credit card dues, monthly loan instalments and rents. Businessmen defaulted on their leasing and the world plunged into a credit crisis of enormous proportions. Manufacturing, hospitality, food, travel and tourism, fast moving consumer goods (FMCG), jewellery and luxury goods, apparel, accessories and entertainment verticalsgot hit big time and may take a couple of fiscals to fully recover the losses.
Indian economy in doldrums
Some statistics of the quarter ending in June are scary. Industrial production reduced by 35.4%. Manufacturing scaled down by about 40% and services sector went down by 35% in it. According to a poll conducted by Economic Times, India’s economy shrunk by as much as a fourth because of the pandemic and lockdown, though the contraction estimates of other developed and developing economies were more or less are similar. According to Chief Economist of India DK Pant, no quarter in the current fiscal shall see positive growth.
Whereas Indian economy was already showing sluggishness before the current crisis, the Ministry of Statistics has stated that Indian growth rate dropped to 3.1% in the last quarter of the previous fiscal due to the pandemic. The figures emerging relating to economy and business are lowest since the pre-liberalization era. Unemployment has skyrocketed. Indian economy lost US 4.5 billion every day in the lockdown period. Up to 53% of the businesses have been significantly affected. Big companies like Tata Motors, Bajaj, BHEL, Grasim, Aditya Birla, etc.,have scaled down operations. Sensex and Nifty behaved erratically. To offset such macro and micro damage to the economy, the prime minister announced an uplift relief package of Rs 20 lakh crore to the country, but the impact of this decision and slew of other measures is yet to be seen.
What can the companies do
The crisis has shown the vulnerability of the economic-social system mankind has painstakingly and meticulously crafted. Resilience has become another word to show the way to companies as they try to stave off the looming threat of bankruptcy,or being pushed out of business. All accountable people in the management hierarchy are being made to answer the same question—are there any hidden efficienciesor redundancies in their domain?If so, how can they be offset. In such a grimscenario, long-term success of companies really depends on how they manage cash flow and balance it with the interests of the employees, while managing supplies to meet demand. Even investments and exploration of fresh business avenues should not be out of the purview. Initiativestaken today can be business leadership of tomorrow!
As far as human resources and the communities are concerned; the companies should engage with them humanely and fulfil their corporate social responsibility. Some progressive-organizations rather than laying off workers have already opted for variable cost structures, presenting win-win formulas to all concerned parties, thus, showing the way to others.
The Rise of the Phoenix
It is not the first time that phoenix is expected to rise from the ashes! Companies innovated and rose after bombing of Hiroshima and Nagasakhi; they weathered the storm of the Great Depression of 1929 and more recently survived the shock waves of 9/11. Similarly, powered by the strong rallying of their companies, the “Asian Tiger economies” resurrected after the depression of 2008. There is no reason that business world shall not emerge from the present scenario howsoever bleak the situation may seem today. It is only in crisis that real potential of organization comes to the fore; companies should continue to deliver reliable and quality results, keep the customer satisfied and engage with external forces that mitigate the impact of the downturn to the maximum.
What needs to be done
According to KPMG, here are some pointers that policymakers can do to help the industry and business world stand on its feet again. Credit ratings need to be recalibrated to include revised risk profiles of affected industries. A framework needs to be created that brings into force a strengthened liquidity management framework. More frequent liquidity assessments are required. Operational risks should be taken into account by restructuring of capabilities in managing cyber risks, technology risks and human capital risks. A strong framework needs to be erected to stress test the impact of crisis on key parameters like profitability and capital adequacy. Business planning needs to be updated and reviewed regularly for relevancy. Companies should always be geared to ensure readiness with continuous development and updating of recovery options.
Reinventing for tomorrow
Even today market sentiment is poor and consumers are conservative towards spending. Even after lockdown restrictions are over, measures like social distancing and cautious interactions are keeping people from going whole hogs into work. Under these conditions our entire business eco-system needs a rethink and recreation. We will have to introspect and re-examine our old ways of working. Productivity needs to be monitored and managed closely with a renewed focus on quality. The situation may warrant redeployment of human resources and partnership models developed with other companies to optimise the use of external factors for leveraging advantages to the common cause of staying profitable.Business leaders would have to decrease the risks in supply chains by sharpening their procurements through data analytics.
The new normal
However, despite all the gloom, there is a silver lining. A recent Mckinsey report says that Indian and Chinese business leaders are most hopeful of an early recovery from trade abyss. As the economies grapple to come to terms with the new normal many new trends are emerging whereas some decades-old systems and practices have crumbled. The biggest gainer from the emergent crisis is e-commerce as people preferred their items to be home delivered rather do bricks and mortar shopping for fear of contracting the virus in busy markets.
Customers’ reaction
Marketing Research company Nielsen has observed five kinds of customer behaviors in connection with the pandemic and their effects on the market. First, customers were buying health-related products. Second, they focussed on buying masks and sanitizers. Third, they stocked groceries and essentials. Fourth, they made a lesser number of store visits. Fifthly, they focussed on “needs” than “wants.”
Digitization and connectivity
Crisishas been marked with a rapid stride in automation and digitization of business. This requires immediate up-gradation of employee skills to make them match the pace of workplace change.Post-Covid reliance on internet has grown manifold. India too needs to improve on its Internet-connectivity. As of now, the standard of performance of Internet in India fares much worse than China and other Asian countries. India also needs to improve the efficiency of its ports and increase speeds of railways and road transport. Ports in China move good five times faster than India.
Conclusion
Indian economy and business need as much a “stimulus vaccine” as Indians need a preventive vaccine from corona scourge. We need to work with a focussed approach to show to the world that Indian economy is resilient to shocks and attract future foreign investments.
