COVID-19 bought a lot of things with it, mandatory masks, lockdown and the grand fall in the economy. And it wasn’t just India that was affected, the whole world went into a standstill, shops shut down, the roads were empty and the offices were unattended.
The pandemic hit hard, especially on startups and new businesses. Everyone scrambled to secure funding, resources were diverted, departments were shut down, offices closed and employees moved home to work.
The affected sectors were retail, tours and travels, oil hospitality, retail, banks, hotels, real estate, IT, and others. The tourism industry was estimated to lose ₹15.000 crore for March and April. The demand for fuel almost fell 46%, since everyone was confined to their homes. Food wastages increased due to affected logistics companies, which in turn affected the smaller farmers.
Many international and domestic investors pulled out funding from companies, businesses where left out to dry, very few operating and functioning during the lockdown. Many companies shut down, losses were incurred, however, a few were able to come up on the other side better and bigger than before.
Entrepreneurs and founders tried their best to reform their business structure and operations, few succeeding. The internal working and functioning of the company have to be flexible to be able to adapt to changes in markets, demographics and now the pandemic lockdowns and changes in demand.
The crisis aversion and management on a micro level solely depends on the founder and company. The resilience of a country’s economy is measured by the companies to be able to withstand crises and have a workable plan to manage said crisis. However certain changes in policies and revaluation of resources by the state or central government can help bridge the gap between financial stress and monetary relief.
After all, the startups growth has been on a tremendous rise, India reaching a grand total of 21 unicorn startups which has boosted the international investment in India and the overall economy.
Entrepreneurs are born from the need to solve problems and bridge gaps between demand and production. They have the platform, means and funds to contribute to the recovery of the aftermath of a crisis.
While a good strategy provides for a stable framework, perseverance and determination is the common denominator to startups that have come out on the other side of the pandemic, and they have come out stronger and better equipped. The COVID-19 pandemic had an adverse effect on the startups scene.
While the lockdown did see an enormous change in the functioning of businesses and the drastic shift of the working force to a work-from-home scenario. Employees had a difficult time adapting to the sudden change in schedules, being locked up at home 24 hours for months on end. Salaries have been cut and many have been laid off to keep the company monetarily stable. While initially the lockdown was 21 days, and many companies had already seen a major hit to production and distribution.
The Government of India did ask companies to pay their employees’ salaries, to help keep families afloat, it was not legally implementable but rather a plea. The Government, for their part, did cut a part of government employee’s salaries to aid in gathering funds for the unemployed, MSME companies, farmers and create economic stimulant packages.
While everything was running on a trial-and-error basis, the government too was learning as they were going. To push the ‘Make in India’ scheme, some reforms were needed to be set in place to help startups and to ease things for the labour/ human capital, a huge portion of which were migrants. This was proving to be difficult in the third ‘once in a lifetime recession’ that the 21st century had seen.
There was a severe impact on supply and demand, while restaurants shut down, the demand for fresh produce shifted closer to home.
On 23rd march, The Economic Times released an article titled “Sensex crashes 3,935 points: What’s behind market meltdown”, that stated that the country had experienced a fall of 13.15% in SENSEX and 12.98% in NSE NIFTY, the worst stats in the history of India. A day after the 21-day lockdown was announced SENSEX released its biggest gain, a value of ₹4.7 lakh crore for investors.
On 24th March, Prime Minister Modi announced India’s first lockdown for 21 days, during his speech he stressed on the Life Before Livelihood debate.
Jaan hai toh jahaan hai – Prime Minister Modi
The 1st of April saw the RBI announce measures to salvage the economic fall. Short term liquidity was increased to provide monetary relief to state governments and exports had been granted relaxed laws.
By 11 April the Prime Minister amended his previous message to “jaan bhi jahaan bhi” roughly meaning ‘lives and livelihoods are equally important’.
The second lockdown commencement was announced on 15th April, the agricultural and horticultural sector were to continue working. On 18th April, the government took precautionary steps to avoid and deter any hostile takeovers as the global share prices of companies were falling. The policy ensures that all countries that share a border with India will face scrutiny from the Ministry of Commerce and Industry, with the concern that China could try to take advantage of the COVID-19 situation.
While the agricultural sector was functioning, many workers in the industrial sectors, construction and others – mostly migrants – had to go back home for the lockdown. The unemployment rate had stood at a 6.51%, rural rates being 6.26% while the urban rates were 7.07%.
On June 20th, the government launched the Garib Kalyan Rojgar Abhiyan for the migrants. There were questions raised about the implementations of the schemes by the migrants since not all daily-wage workers have a record of being paid salaries. It was also pointed out that the government was unable to keep up with implementation of minimum wages for migrants under regular circumstances, how would they be able to do better and as much as before.
On 28th April the former Chief Economic Advisor stated that India should prepare for a negative growth in 2021 if things remained the same.
The Prime Minister saw the COVID-19 situation as an opportunity for India to become self-reliant. He proposed the Atmanirbhar Bharat Abhiyan economic package at ₹20 lakh crore, about 10% of the GDP. The package consisted of reforms and funding to businesses with a direct cash wire to the unemployed and those living under the poverty line. Loans free of collateral and government back were provided to businesses to help resume economic working and to protect the employment rate. Meaning that the government will too share the risk for this sector.
One of the changes made was to privatize sectors like power, defence and space to raise money. While the policies did not help the short-term problems the country was facing, it was a step in the direction of being about to resume business and stabilize the volatile economic status.
By the end of April, businesses like dairy, tea, and other agriculture opened and were functioning under relaxed lockdown guidelines. The government had transferred just about ₹18.000 crore to farmers under the PM-KISAN Scheme.
The definition of MSME (Micro, Small, and Medium Enterprises) was revised so that more companies could avail the benefits of the schemes. Under this the investment limit has been raised and the distinction between manufacturing and services has been removed. On 16th May the Finance Minister announced the amendments to the Essential Commodities Act, which aimed at deregulating commodities like pulses, oils, onion and potatoes, meaning the supply of these foodstuffs can be regulated only during extraordinary circumstances.
The commodities it includes are “drugs, fertilisers, whether inorganic, organic or mixed; foodstuffs including edible oils; hank yarn made wholly from cotton; petroleum and petroleum products; raw jute and jute textiles; seeds of food-crops and seeds of fruits and vegetables, seeds of cattle fodder, jute seed, cotton seed.”
By making a commodity essential the government can control the production and supply as well as distribution of that commodity and they can impose a stock limit that can be triggered.
While due to the Atmanirbhar Bharat Abhiyan the restrictions on the agricultural sector has been relaxed, and funds have been diverted to provide for micro-food companies. The strict and effective implementation will be greatly beneficial to the sector, since the agricultural business drives the country’s economy.
By the second week of May, companies and businesses had started to open up for business with a staffing of just 33%, a few going as low as 5% working strength. After a student that was conducted it was apparent that there were 5 states that were helping speed the recovery by contributing 27% of the GDP. The states being Kerala, Punjab, Tamil Nadu, Haryana and Karnataka.
On 2nd June, another incentive was offered to businesses that manufactured mobiles locally, this incentive includes ₹49,995 crore. Five Indian companies would be selected for this too. The foreign companies to avail these benefits are Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron. The domestic mobile manufacturers selected are Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs and Optiemus Electronics.
As much as India is doing for its economy, it is safe to say that the effects of the pandemic will be felt long after this year. Priyanka Kishor, head of economics for South Asia and South-East Asia, has claimed a projected potential growth at 4.5% over the next five years as opposed to the 6.5% before the virus in a report.
“Capital accumulation takes the biggest it because we expected balance-sheet stresses to worsen following the crisis, lengthening the investment recovery cycle.” Kishor said as reported by The Logical Indian. However, according to the article, India has seen a sharp growth in the festival season.
The National Education Policy 2020 was approved on 29th July. It is to replace the Old National Policy on Education 1986. It consists of guidelines and is to reform the education system by 2021. However, it is not mandated, the government will let the states and institutions decide on the implementation. The 10+2 will be replaced with the 5+3+3+4 model, the stages being, Foundations Stage, Preparatory Stage, Middle Stage and Secondary Stage. Examinations will be redesigned and standards will be established by an assessment body, PARAKH. The office will be on experiential learning and coding will be introduced in the 6th year. Another addition is that the Midday Meal Scheme will include breakfast and the student health will be of prime importance. This will allow students to build problem-solving inter-disciplinary skills and will promote abstract thinking and solving.
On 12th October, Atmanirbhar Bharat Abhiyan 2.0 was released, an additional ₹73,000 crore package. This economic stimulus is an attempt at reviving the economy using policies and lowered interest rates.
Atmanirbhar Bharat Abhiyan 3.0 was released on 12th November, ₹2.65 lakh crore.
We have seen a rise of India’s rating from Moody’s Investors Service from a low investment grade of Baa3 with a negative outlook on June 1st. The organization claimed that the decision was taken due to the low growth of the Indian Economy compared to potential. Moody’s altered their annual growth prediction from the previous -11.5% to a -10.6%. This revision was due to the Atmanirbhar Bharat Abhiyan 3.0 stimulus package.
Last is the effect of the virus on the health sector as it is the epicentre of the global ongoing pandemic. Private hospitals have extended their resources and equipment to the government to help deal with the crisis. The hospitals themselves have been facing funding problems, as about 80% of their operations are fixed costs. Moreover, there had been a lack in resources due to affected logistics and manufacturing. There has been a severe decrease in optional surgeries, international patients and out-patients. This impact on cash flows will trend for a few months if not longer.
Many hotels were used as isolation wards for asymptomatic and mild cases to the government to be used since the country did not have any secured infrastructure or experience with dealing with a global pandemic of such a large scale. Like Taj Mahal Palace in South Mumbai that was offering free stay for doctors tested positive for the virus, The Park Inn by Radisson near an airport in Amritsar, among a few.
The Financial Minister had announced medical insurance cover of about ₹0.5 crore per healthcare worker. This scheme includes 2 million health service workers and others. Seeing as the Indian healthcare sector is privately owned, about 87% of the sector, making it a major stakeholder.
The center has allocated ₹10,000 crore to get the priority group of 30 crore Indians vaccinated in the first phase. According to the article published by Indian Today, the government is unwilling to take up loans from international banks to fund the vaccinations. While the avoidance of further debt by the country is good, such a humongous operation will not be easy to run as unseen expenditure may occur.
India is already supported under the COVAX global vaccine sharing plan, cooperated by the World Health Organization. India has taken steps to prepare the vaccination process by training medical officers, cold chain operators, supervisors, data managers and coordinators and resources like 29,000 cold chin points, 240 walk in coolers, 70 walk in freezers, 41,000 deep freezers as reported by Mint. The country has taken a keen interest in the development and distribution of the vaccine to its citizens.
Pfizer, an American pharma company, has sought approval from the DCGI (Drugs Controller of India) to authorize its coronavirus vaccine. The Controller may give the approval if the board is satisfied with the trials conducted in other countries, states NDTV.
“[…] Pfizer’s CT-18 application for grant of permission to import new drug [COVID-19 vaccine] for sale in India is under process. As per New Drugs and Clinical trials Rules 2019, the application has to be decided within 90 days […]” as reported by NDTV.
While the economic future of India does look a bit dire, preventative measures and policies have been put in place to slow the economic downfall and accelerate its growth. While the policies made have been a key effort, the most important part of the process is implantation, the effects of which are yet to be seen.