The Report Cover Impact of Covid -19 on Industry in India.

From March 2020 to next 9 months are very unpredictable for all Companies. This was completely dominated by the COVID-19 Pandemic.

It is seen in history never & first time that nearly everyone in the world has decided to stay at home, quarantined. We are currently alone.  With a period of about a month, This is because we decided to isolate ourselves from each other because we are a Human, for care of each other.

Its first time ever this type of disease spread in all countries. Approximate three billion people are currently under lockdown, Millions of people suffer from this impact, and Humans are now in search of basic needs and resistance against this pandemic. Millions of people have lost their jobs, and the extent of this impact on the global economy is difficult to assess.

If the Global situation will under control than it will be a couple of months until the next new normal is created. There is no doubt at all that business must resume, or there will be no economy. Despite this all business sales are expected to rebound once the crisis is over. History has proven this time and again, as outlined here.

In practical terms, the leap in unemployment, the store closures, unknown health risks, and economic concerns will have an impact on the number of weddings and their timing.

Assumptions:-

The COVID-19 pandemic subsides in India from its peak level and all businesses resume operations from mid April 20 to august 2020 on wards, although in a staggered manner. –

Businesses across the globe (excluding China) also resume operations from June 2020, although in a staggered manner. – More businesses across China resume operations from April 2020 (over 60% of the companies in China have actually resumed in March 2020).

IMPACT ANALYSIS  OF COVID -19 in Industry

Sectors Impact Recovery Period Reasons
Drugs and pharmaceutical Moderate Short Term ➢ Production is expected to recover quickly as the government is extending support for essential commodities.
➢ Businesses have started resuming operation in China, which accounts for around 85% of India’s active pharmaceutical ingredients imports. This alleviates the supply chain disruptions, though not by a great extent.
Livestock Severe Short Term ➢ Prices and demand may increase after the outbreak.
Retail (non-food items) Severe Short Term ➢ Sales of essential items may recover quickly, while sales of non-essential items might take slightly longer to recover. However, pent up demand will aid a fast recovery.
Wholesale (non-food items) Severe Short Term
Textiles Moderate Short Term ➢ Discretionary spending is expected to remain muted for at least one quarter. However, demand for essential commodities such as masks, cotton rolls, gauzes, etc. will not be negatively impacted.
➢ Even if demand for low-priced products starts reviving after a quarter, the uncertainty and slow growth or loss of income may impede a quick recovery for the next two quarters.
➢ Exporters will take longer to recover until recessionary pressures in the USA and European countries fade away.
Logistics Severe Medium Term ➢ Slowdown in the tourism sector will have knock-on effects on passenger traffic. Heightened risk aversion will prolong the recovery.
➢ Cargo traffic is expected to pick up once businesses start resuming operations across all countries. However, low consumption expenditure will delay the recovery.
Metals Moderate Medium Term ➢ The metal industry has strong forward linkages to many important sectors such as automotive, construction and infrastructure. Hence a slowdown in business activity in these sectors will inevitably drive down the demand for basic metals.
Automotive High Long Term ➢ Demand for cars is likely to be deferred or dropped given low consumer confidence, subdued economic activity, lower disposable income and higher prices.
➢ Demand for commercial vehicles will be dependent on growth in Gross Material Products (GMP), which is expected to be slower.
➢ Component dependency will create supply side disruption.
Entertainment Severe Long Term ➢ The biggest concern is the likely continuation of social distancing measures to avoid the risk of any relapses.
➢ Revenues from advertisements will be dependent on revival of the aggregate demand in the economy.
Banking High Long Term ➢ The Reserve Bank of India (RBI) estimated that Non-Performing Assets (NPAs) may increase to 10.2-10.5% by September 2020. With the outbreak of COVID-19, this figure is expected to increase.
➢ The phase to recovery will depend on the outcome of the measures that the RBI has initiated and is likely to take place in the following weeks.
Gems & Jewellery Severe Long Term ➢ Exports constitute a major portion of the net sales for domestic companies. With recessionary pressures across the globe, demand for gems and jewellery is expected to be severely impacted over the next couple of quarters.
Tourism Severe Long Term ➢ Even when the travel bans are lifted, both foreign tourist arrivals and domestic tourist movements are expected to remain very low because of heightened risk aversion, measures related to social distancing and lower disposable incomes.
Hospitality Severe Long Term ➢ Slowdown in the tourism sector will have knock-on effects on hospitality. Occupancy rates may remain very low until Q1 2021.
➢ In an effort to increase and improve the bottom lines, many businesses are expected to cut down travel and accommodation costs for their employees.
Electronics High Long Term ➢ Demand for white goods and other high-end consumer durables will remain impaired as consumers are expected to postpone their purchases because of lower disposable income, and uncertainty over growth prospects.
➢ About 50-60% of the products and 70-80% of the components are imported, and a shortage of components of electronic goods from China is likely to keep prices higher and hence will impact demand.
Micro, Small, and Medium Enterprises (MSMEs) High Long Term ➢ Recessionary pressures across the globe are expected to have a direct impact on the level of global exports. Given that MSMEs contribute to over 40% of India’s exports, the impact will be severe and linger for a longer time.
➢ MSMEs are expected to experience severe liquidity problems due to delayed payments from their customers.
➢ The strain in the banking system is expected to increase the credit gap for MSMEs.

Impact Moderate High Severe
Recovery period Short Term Medium term Long Term
Upto 6 Month 7 to 12 Months More Than 12 Months

Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

Tags:

Author Bio

Qualification: MBA
Company: 360 FINANCE
Location: SURAT, Gujarat, IN
Member Since: 27 Jun 2020 | Total Posts: 1
I, Pankaj shah -Business Analyst (Harvard University) & MBA (Finance) & also Inter -CA ,B.com (Accounts & Audit), Certification of Diamond Foundation Course (De beers) Having 10 years’ experience in diamond industry, working as a Chief  Accounts manager in Sight holder company.  I have experienc View Full Profile

More Under Finance

One Comment

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

October 2020
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031