It’s been more than 135 days since PM Modi declared the nation-wide lockdown and needless to say we are sinking deep in the black hole of coronavirus. Hunt for vaccines is still on, the manufacturing sector is bleeding, the economic outlook is dooming, and obviously, society is not stable. We have probably read a plethora of articles and blogs on the possible impact of this pandemic and how the situation can change in the future.
The key takeaway from all such secondary and primary research works is the same — it would take 1 to 2 years to restore and revive the economic wheel. The obvious question arises; how is this pandemic or the “new normal” supposed to change the industrial ecosystem in our country?
Courtesy COVID-19, we have already witnessed a lot of disruptions — SME level manufacturing of PPE kits, everyone trying to manufacture hand-sanitisers, Hyundai collaborating with Air Liquide to manufacture ventilators, cost leadership in manufacturing healthcare equipment and accessories, the emergence of remote working or hybrid working concepts (no one expected this in March 2020), and the list goes on.
Traditional sectors that typically showcase the same trend as that of the country’s GDP are expected to bleed and may expect a recovery in the next financial year. Construction, infrastructure development and allied sectors (like cement, steel) are already bleeding as there is a shortage of labour and lack of demand from the market. Worth mentioning is the severe impact on the real estate segment (both rental and sell). Both individual and institutional buyers are going slow and managing cash judiciously for future exigencies.
All these would result in a lack of demand, cost and time overrun. For large and capital intensive construction projects, we need to appreciate that offering loan moratoriums might not be the best decision as, during the moratorium period, interest calculation is still on, which would create stress on the cash flow. Construction in India is interlinked with various allied sectors (like mechanical and electrical equipment, cement, steel). All these sectors would also go slow for quite some time.
Conventional manufacturing sectors (such as plastic, rubber, chemicals, paper, etc.) are purely market (domestic and export) driven and are expected to restore by the end of the current financial year. We should watch out for the possible ushering of automation, digitisation and (possible) implementation of Industry 4.0 concept. We should expect many illustrations of horizontal and vertical diversification and examples of forward and backward linkages soon.
India is a diversified economy and the taste and outlook vary from North to South. Marketing campaigns and products which are popular in Western India have failed in Eastern India. In such a vast country, consumer-driven sectors (such as food and beverages, FMCG, lifestyle and apparels including ready-made garments, automobile) might generate a mixed reaction.
The food and beverage segment is expected to revive soon as it is directly related to essential consumption. Numbers show that positive growth has happened in the other consumer-oriented sectors in June and July and this momentum is expected to go on. By the end of this calendar year, these sectors should get restored. Urban India would recover first, but semi-urban segment would take some time.
Sunrise and R&D oriented sectors (like IT and ITES, Pharmaceuticals, Biotechnology, Telecom and Electronics) might raise an interesting observation. Pharmaceuticals and biotechnology sectors have been doing extremely well and demand will increase in the future. Owing to the recent Sino-India cold war, we would witness more inclusive growth and proliferation of homemade brands in the electronics sector.
The future is bright and there is a huge market to tap. The present and future belongs to IT and ITES, as the lockdown customers prefer convenience in lifestyle and livelihood. This has resulted in the popularity of Fintech, Agro-tech, Digital education, Telemedicine, home delivery and e-commerce segments. We should expect more innovation in recent times.
Telecom is acting as a backbone for all the other sectors and doing well. As we all know, aviation and hospitality/entertainment sectors are physically oriented (and not virtual, will keep on suffering). Since the last 4 months, the dip has already created a hole and recovery is not expected before the end of the next calendar year.
India would need more policy reforms and more innovative initiatives from the unicorns and our large conglomerates. Atmanirbhar Bharat is our dream, but we need more collaborative approaches from Government and private sectors (which is aptly supported by our BFSI and regulatory aspects) to restore normalcy. The focus should be more on digital initiatives and on taking all protective measures to revive the manufacturing sector at the earliest. This, in turn, would reinstate the service sector.