This article is a humble attempt from a layman’s perspective, that has been penned during the lock down times to discuss on the economic conditions and circumstances that may prevail post lockdown in India and its possible consequences on employment & business in general.
In the recent past, few months there has been a sharp loss of economic momentum in India & across the globe. The relevant question here is the potential impact of COVID 19 on the Indian economy and on the lives of common man. Is India headed towards its worst recession in past decade? Or is it an unprecedented slowdown ever impacted India? Are we prepared enough to handle the issues that may arise in these critical times ahead?
As witnessed by all of us, it is seen that the entire global economy has been largely affected by the pandemic and this might even turn out be the worst recession, since the Great Depression in the 1930s. Recently IMF has projected a GDP growth rate of 1.9% for India in 2020 compared to 7.9% in 2015-16. A Chart below depicts last 3 years GDP growth rate in India:
As per recent World Bank reports, it is estimated that 40 million to 60 million people will fall into extreme poverty line i.e. (Below Rs.142/day) in 2020. For the first time since 1998, poverty rates will go up as the global economy falls into recession and there is a sharp drop in GDP per capita. The ongoing crisis will erase almost all the progress made in the last five years.
The U.S. has seen a huge spike in unemployment, as over 26 million people have claimed for State support because of losing their jobs. Data released in China in March indicated that roughly 5 million people lost their jobs amid the outbreak of the coronavirus in the first two months of 2020. It is expected to increase drastically in the upcoming months as many US & European countries manufacturing units are contemplating for their exit from China, in turn, backed up by their respective countries with special packages & incentives.
In India, this crisis has led to a spear in the country’s unemployment rate to 27.11% as on May 3rd, The Centre for Monitoring Indian Economy (CMIE) has said. COVID -19 has hit almost every sector in the India. Particularly aviation, hotel business, automobiles, tourism, Imports & exports, MSME & small scale industries are worst hit. These sectors are facing a serious liquidity crisis & questions on their survival. Apart from this, textile Industries, real estate, entertainment industry also distressed by this pandemic.
Coming to IT Sector, “When America sneezes, India catches a cold. When Europe too sneezes, India gets a fever”, retorted by an official of a large software company. It is feared that COVID-19 will significantly impact the $180-billion Indian IT sector and the impact may be worse than that of the 2008 global financial crisis. The fear is justified, considering the US and Europe, which together account for more than two-thirds of India’s IT exports, which are among the worst affected geographies by the pandemic. Clients could significantly reduce their IT spending this year
COVID – 19 has not spared our media houses as well. While The Indian Express and Business Standard have announced pay cuts, others are also taking steps to curb costs. On April 10th 2020, 15 employees of News Nation, a Hindi news national channel, were asked to leave with immediate effect. On April 13th 2020, digital news website The Quint asked about 45 employees to go on indefinite leave without pay.
Scandinavian Airlines & Norwegian Airlines in US has announced that it would temporarily layoff 90% of its employees. Marriott International the World’s largest Hotel Company said that it has started 10,000 of its employees.
Ride hailing company, Uber has laid off its 25% of its workforce which is more than 6500 employees via a video call that just last over 3 minutes. It has mentioned that, closing or consolidating some of its 45 offices globally and has targeted to reduce its costs by over $1 billion a year by these actions, as per the First post agency reports. Followed by Food delivery Bengaluru based company Swiggy also announces 1,100 of its employee’s layoffs with 3 months’ salary & other benefits.
Indian social commerce startup Meesho is reported to have laid off over 200 employees. Besides, over 100 people were asked to leave the Bengaluru based scooter rental startup Bounce. Insurance startup Acko too reportedly let go of 45-50 employees. Indian startups are running out of liquidity and funds. Venture-backed startups tend to have a fair amount of cash on hand but without intervention, some 41% of tech startups could exhaust funding within next three months.
As per The Federation of Hotel & Restaurant Associations of India, the Indian hospitality and tourism industry is staring at a potential job loss of around 38 million, which is 70% of the total workforce. The apparel exports sector alone estimates 2.4 to 3 million job losses because of order cancellations. In March, India’s merchandise exports shrunk by a record 34.6%, while imports declined 28.7% as countries sealed their borders to combat the virus.
If you trace back to history, on an average any recession is likely to last at-least up to 12 – 15 months. Keeping the similar time frame in mind, Are we ready to battle this crisis? Are we armed with enough equipment & strategy to protect ourselves & our families? Do you think government has enough funds to take care of middleclass man & his dependent family members? Who is our Savior?
LOCKDOWN ENDS AND CRISIS BEGINS
However coming to our bread & butter, we the majority of Indians are in the same boat – we may not get infected due to COVID 19 but it is pretty sure we will be affected in many ways due to lockdown. I.e. once lockdown ends, the crisis begins.
It is likely that in future also we tend to have the same level of expenditure commitment or in fact even more that needs to be pleased from our regular earnings sources. Despite that every now & then, we run out of cash & possible delay in credit card repayments. This had become part & parcel of our life before lock down & even now. Unfortunately one bad day employment ceases, cash inflow stops & you may be left with zero balance in your bank account & in few the cases it might be negative balance also. What’s Next ?, Are we secured enough to pay off our regular commitments – Say the monthly rentals, insurance premiums, fuel charges, vehicle maintenance, school fees, elders medication charges, or even to pay for monthly groceries, EMI’s What not ? That day, the question for survival arises. Darwin theory phrase goes like this “Survival of the Fittest”, not strongest or largest.
In this ever-changing situation, every individual has to update & make them ‘Fit’. It could be an employment, health, finance relationships & anything for that matter. In simple terms, we need to bring in few healthy habits into our daily routine life which will protect us or mitigate the evolved risk ahead of time even if an economic slowdown or recession takes hold. As, today ‘Currency has become necessity’ like other 5 elements (Earth, Air, Water, Fire, Sky) in our society. Then in that case, inculcating financial discipline is of paramount importance and following are few thoughts put across here, which may assist in mitigating the detrimental consequences.
> LIVE WITHIN ONES’ MEANS: If you make it a habit to live within your means each and every day during the good times, you are less likely to go into debt. This will save us in bad times.
> INCREASING SAVING POTENTIAL: ‘A Rupee saved is equal to rupee earned’ ,Saving Potential means cash in hand or in bank left with you, after clearing all your commitments including your annual income tax payments. This will act as real savior in near future & wealth creator. Saving potential can be improved, not only by having control on our regular expenses but also on the kind of lifestyle we lead. Only by regular monitoring of our routine expenses this can be achieved.
> HAVE AN EMERGENCY FUND: It is better at least to have atleast 3-6 months of net salary in your bank accounts. This can be built, through regular savings as discussed above. If you have your own cash, you will be less dependent on borrowings to cover unexpected costs or the job loss. This liquidity gives you access to emergency funds & brings in confidence level even, if you lose your job or are forced to take a pay cut.
> HAVE ADDITIONAL INCOME: It’s not a bad idea to have a source of extra income on the side. ‘Additional income means additional security’. Once a recession hits, if you lose one stream of income, at least you still have the other one. You may not be making as much money as you were before, but every little bit helps. ’Little drops make the mighty ocean’. Later point, you may even come out the other end of the recession with a growing new business as the economy turns up.
> HAVE INVESTMENTS FOR LONG TERM: As we near retirement age, we need to make sure that we have enough money in liquid, low-risk investments to retire on time and give the stock portion of your portfolio time to recover. Remember, you don’t need all of your retirement money at 60—just a portion of it.
> KEEP YOUR CREDIT SCORES HIGH: When times are tough, maintain communication with your creditors to keep them happy by making arrangements to keep your accounts in good standing. Many lenders and businesses would rather see you continue to be a customer than have to write off your account as bad debt. Nowadays banks also provide options to restructure existing loans or even to transfer your existing loans to other banks, where you can find better scheme of repayment facility.
> HAVE DIVERSIFIED INVESTMENTS: Warren Buffet’s quotes ‘Not to put all eggs in one basket’. It’s better & safe not to put all our savings & investments in one portfolio. Also, we need to align the 3 aspects here, – Liquidity, Profitability & S Investor should have good knowledge before investing in any portfolio. Entire investments has to be allocated & diversified into equities, debt, fixed deposits, mutual funds, gold & few government notified bonds also. You can take help of good financial advisor or Chartered Accountant if required.
> BETTER TAX PLANNING: One has to make an optimum tax planning in beginning of every financial year; proper tax planning will help us to bring an additional inflow of cash every month. Many times tax payers tend to pay more tax without aware of existing tax benefits permitted under tax laws. Atleast once in a year make a phone call & say ‘Hi’ to your tax professional, who can help you to optimize your tax planning, rather than rushing out for last minute tax filings.
> DO NOT MAKE ANY BIG INVESTMENTS: Now the prices are stuck everywhere especially in real estates. Not safe to invest, unless you have strong back up apart from your regular income source.
> DO NOT JUMP JOBS IN A HURRY: When the job market is looking nervous, it is best not to be adventurous in career. A lot of companies have come up in last few years. But many of the start-ups are bleeding heavily & could close down if economy worsens. So before switching jobs need to do in-depth study, before you jump to other ship.
> TAKE A MEDICAL COVER FOR THE FAMILY: Health insurance is one important portfolio which protects our other wealth portfolios. In this uncertain environment, make sure family has a medical cover apart from the group insurance provided by your employer, as group insurance medical cover may cease once you leave your job.
> OTHER EDGES: A mother or wife in a family will play pivotal role in making small savings. A middle class family can save a good amount, by reducing few expenses like avoiding dine out frequently, repeated coffee breaks, mobile & cable plans, gym or club memberships, clothing & apparels, car-pooling, birthday or anniversary celebrations restricted to family members & limited audience. ‘Each penny has its own value in bad times’.
These are few key pointers, which could be a savior for life. Before I conclude, would like extend heartfelt thanks to divine power who gave a thought to pen this article. My Gurus who has guided me in all times. Finally my fellow seniors who helped me to edit & complete this article. Have put in my time & effort during the lockdown times to write this, just to keep my closed circles safe in upcoming crisis. As, we need to be armed with enough forces & equipment to win the battle, rather than looking out for help during crisis.
Hope this article finds you useful. Please share your valuable feedback or inputs on this. Stay Safe, Stay Healthy.
 Reports Published in daily newspaper ‘The Hindu’ on May 5th 2020
 CNBC reports on China Economy published on March 16th 2020
 Business Line Reports Published on April 08th 2020 in an article Indian IT sector may take a heavy hit as COVID batters US and Europe
 News reported in Scroll. In on Thursday, May 21st, 2020
 Source Business Insider dated 29th April 2020