The virus outbreak has become one of the biggest threats to the global economy and financial markets. Being part of the global village India is not immune to the virus. The 21 days Lockdown is announced by PM all over the India on 24th March. While the Government of India, as well as State governments, are treating & monitoring the situation closely to control the corona virus pandemic; it can take 1 – 2 months to get a clear picture of the problem.
Various relief measures have been announced by the Finance Minister on 24th & 26th of March. The government has also told India Inc to not cut jobs or salaries. So Fixed cost of Industry would be the significantly the same but the level of operations is expected to reduced even after lock down. An already struggling Indian economy could take a big hit following the corona virus threat. Several sectors are facing severe disruptions as the country grapples with the impact of the deadly virus
As they say, every cloud has a silver lining. Prime Minister Modi assured that the government is with us and we need to help ourselves by undergoing self-quarantine. As citizens, we need to fight the global crisis with joined hands and follow basic health and hygiene instructions, directed by the Government of India. We will need to be careful towards our actions & together we will definitely overcome this virus and will make this planet a better place to live. Hope the market anxiety will die down soon and the economy will take an upside.
A. Impact on GDP of COVID -19 outbreak
India’s economic growth could take a hit of up to 0.5% (Half percentage) point in FY21 because of the disruptions caused by the Covid-19 outbreak, early estimates by the government suggest. But independent economists see a deeper cut of up to 1% (one percentage).
Growth in the first two quarters of the next fiscal could be as low as 4-4.5% the economy is forecast to grow 5% in current fiscal, the slowest in 11 years.
B. Impact on Manufacturing Sector of COVID -19 outbreak
Production has come to almost a standstill, as Government had imposed lockdowns to help break the chain of the corona virus outbreak. Since these measures will remain in place at least until the end of 3rd week of April, companies are sure to lose a significant part of the output for the March & April months. Even an improvement in the Covid-19 situation wouldn’t bring much respite to the industry in April as it would take a while for consumer confidence to become normal.
One really does not know when things will return to normal. But going by the experience of China, Korea and other markets, at least a month of business is likely to be disrupted. There will be a period of time when companies won’t be generating revenue and there will be some level of fixed expense that is incurred and that will drain the P&L for everyone. Nobody is spared.
C. Impact on Service Sector of COVID -19 outbreak
First hot on service Sectors such as tourism, aviation, hospitality and trade will face the first brunt of the severe travel, assembly and activity curbs imposed by the governments across the world, followed by a wider impact on other sectors as economic activity stalls.
Sectors such as consumer durables, automobiles and pharmaceuticals will feel the brunt of supply constraints.
“On top of the likely consumption slowdown, production is also going to be hit.
The US and Europe are expected to slip into recession by July, dragging down overall growth.
Its potential impact on the Indian economy is not yet known, but several sectors are already feeling the pain, here’s a look at the sectors most impacted by the outbreak.
1. Hotel Business:- With complete lockdown, business hotels in major cities could be left with a approx all empty rooms. Average occupancy in these hotels would also take time to improve even after the lockdown.
2. Restaurants:- As people become more cautious, even after the situation is normal, it would take time to return to normalcy.
3. Multiplexes:- will also have to contend with 100% fall in demand due to initial panic of the virus due to lockdown & after that the panic factor. Movie producers globally & in India have deferred the release of movies such as the latest James Bond franchise, No Time to Die, and Akshay Kumar’s Sooryavanshi.
E. Apparel Business
India exported over Rs 1 lakh crore of garments in 2018-19, according to the ministry of commerce. Exports bring in 60% of Indian apparel makers’s revenues. Europe alone accounts for a third of India’s garment exports. But with the region being declared the new epicentre for the disease by the World Health Organization, new orders are bound to be affected. “But it is hard to assess the outcome now. What is accentuating the apparel industry’s problems would be the decline in footfalls at stores, both as a result of people’s reluctance to visit them and the closure of malls.
F. Consumer Durables and Electronics
As India grapples with a rising incidence of the disease, visits to stores might dwindle due to a fear of being exposed to the virus in public spaces in April 4th week and May also.
Similarly, mobile handset shipments to India are also likely to be hit by the supply disruption in China. According to Counterpoint Research, there could be a 15% fall in mobile shipments in the January-March quarter, from the corresponding period of 2019, and there could be a similar impact in the next three months.
G. Auto Sector
The automotive industry is expecting a significant loss of production and in revenue in March & April because of the lockdowns to combat the Covid-19 outbreak & after that also. While sales are usually high in March for the automotive industry, it was different this time even before the current situation arose. Production was estimated to be 1.8-1.9 million units across segments this month as against 2.1 million units produced a year earlier, as companies were preparing for the transition to Bharat Stage-VI emission standards that come into effect on April 1. Automakers were also facing shortage of components from China, where factories were shut for much of January.
India on March 12 suspended almost all visas for a month. With the number of Covid-19 cases in India increasing, travelers might be hesitant to even fly within the country. There will be a further demand slump in the domestic segment, at least for the next few weeks.
F. Poultry Sector
Significant fall in demand for chicken With the spread of the corona virus, it was not surprising to see a spurt in unsubstantiated social media messages on the dos and don’ts. Among these was a warning to stay away from meat, which has driven down demand for chicken, the meat of choice for Indians
I. Banking Sector
Banks will also have to be wary of a rise in non-performing assets (NPAs). If the shutdown on travel and malls continues for a month or more, a zero-revenue situation will definitely impact the ability to service loans, he said.
Unlike most sectors, FMCG has been an unlikely gainer from the outbreak. Panic buying has increased consumption in FMCG sector across the country. Consumers have been hoarding basic food items such as milk, curd, rice, atta, oil and lentils, as well as personal care products such as soaps.
Initially, Indian pharmaceuticals industry was facing troubles in importing raw materials and active pharmaceutical ingredients (APIs) from China. Although this snag has been resolved, uncertainties have grown due to increasing impact in India & on the exports front, especially to the markets in US & Europe. With travel restrictions in India, between Europe and the US, Indian pharma companies are unsure of product off take in these regions.