IMPACT OF COVID-19 ON INDUSTRIES-DECODED-BY CS ROHIT KUMAR

Gravity of COVID-19 outbreak is being felt across the globe. Since nobody has ever imagined such a situation, so preparing to fight against it seems quite difficult. For Government, to continue with lockdown or managing economy, becomes a mutually exclusive decisions. Every economic sector is finding itself difficult to navigate through such a tough time and running a country is literally like chewing glasses. But, this unprecedented situation will definitely change the rules of doing business and will help some sectors to enter into boom phase when the dust settles. So, let's discuss the impact of COVID-19 on various sectors:

1. TEXTILE SECTOR:

After agriculture, textile is biggest employment generator in Indian economy. This pandemic hit this sector at a time when the sector is facing sluggish growth with wafer-thin margin. Eleven countries buy 41 % of India's cotton yarn and these countries have reported COVID-19 cases [According to Cotton Textile Export Promotion Council(Texprocil)] .US and the Europe are the two largest markets for Indian textile exporters which are hit very badly by this pandemic.

2. REAL ESTATE

COVID-19 has added fuel to fire for this sector which has already been facing liquidity crunch and stricter legislations (i.e. RERA, IBC). Nature of this sector is such where labour is required in abundance. Since COVID-19 put a full stop on every activity, so workers on roll hit company margin. Another factor which real estate sector is currently facing is Delay in completion of units and after this pandemic, delays could run into several months or even years. 

Therefore, the Government is planning to issue guideline and regulatory measure to help real estate sector in dealing with crises triggered by the COVID-19 outbreak, Housing and Urban Affairs Secretary Durga Shanker Mishra Said on wednesday.

3. TOURISM & HOTELS

This sector is in coma state since this pandemic hit India. Occupancies across hotels crashed to Zero, and risk aversion to travel and unfamiliar surrounding would be high even after lockdown. According to experts, these two sector will witness one of the longest tail periods of impact.

4. AVIATION SECTOR

Airlines are fighting for survival in every corner of the world. In India too, this sector has been experiencing dwindled cash flows, and the COVID-19 will worsen this more. However, the three-month moratorium on term loan installments announced by RBI provides some sort of relief. Apart from cash flows issues, blanked flying ban will lead to substantial decline in demand for turbine fuel and trimming of employees salary due to acute fall in revenue would be common phenomena.

5. AUTOMOBILES

This global pandemic comes at time when both the Indian Economy and automotive industry were hoping for recovery, and even after open up, consumers sentiments are expected to be unfavourable which will lead to the muted demand for this sector, which in turn affects the steel manufacturer.

The impact on this industry could be from short to medium term which may range from shortage of raw materials, shifting of production to other countries, liquidity crunch to delays in availability of models and deferred launches.

6. BANKS & NBFC

Banks & NBFC in the country are meant to circulate the monies to Industrial houses. Since overall industrial sector is going downturn which will lead to build up more NPAs (Non Performing Assets) in Bank & NBFC books. And, this pandemic came at time, when our country is already struggling to deal with NPAs. The three months moratorium will only help in delaying the impact in the books.

In case of NBFC, the situation is more worst because COVID-19 will not only hit on asset quality but will add more strain on fund raising side.

 

7. ENERGY

Since impact of COVID-19 outbreak on overall economy is going to be deeper, so how this sector can be untouched. Industrial & commercial establishments are shut-down, and approximately 1.3. billion citizens are obliged to remain within the confines of their homes. Consequently,  demand for energy from industrial and  commercial customers has reduced significantly.

Above mentioned sectors are amongst those which are affected by COVID-19 very badly, but there are few other sectors for which COVID-19 can be double edge sword , not a complete boon. Let's see which are those sectors:

1. PHARMACEUTICAL INDUSTRY

There is no doubt that the demand for medicine shoot up. Though this could be good news for this industry but much affected class for this is consumer because after COVID-19 outbreak cost of raw materials and drugs has increased significantly. But the bad news is that India, which is a leading exporter of generic drugs across the world, depends on China for more than two-third of its bulk drug needs.

There is one interesting estimates of government of India that India ranks third worldwide for pharmaceutical production by volume and 13th by value. It accounts for about 10% of the world production by volume and 1.5% by value. This apparent discrepancy points towards the relatively lower price of Indian pharmaceutical products, and the high demand they enjoy in the global market. A major supplier of affordable low-price drugs across the world, India’s role as the “pharmacy of the world” is well acknowledged by experts. 

With Covid-19 bringing to the forefront of India’s blind spots as a global pharma giant when it comes to generics, India might want to reduce its dependency on Chinese bulk drugs for strategic reasons.

2. ONLINE MEDIA AND GAMING:

As more people stay home, self-isolation and quarantine measures increased the demand of online content such as Video on-demand (Netflix, Amazon prime etc) and gaming. This is not required to be further demonstrated  as we all are self witness to this since March 24, and mobile data literally became like oxygen for us. Since we all are so much dependent on mobile data, so you can guess situation of telecom sector.

3. INFORMATION TECHNOLOGY (IT) & ARTIFICIAL INTELLIGENCE (AI):

IT & AI is set to see growth in the coming days as the dust settles. This pandemic will help to give an opportunity to IT sector to test some futuristic concepts which may become mainstream after COVID-19. The biggest advantage of this sector that IT professionals are still doing work remotely without much hustle during these days. But this sector is also grappling with some issues like cyber threats because most of people connect to home network

WHAT LYING AHEAD FOR INDIA?

This COVID-19 makes China a less favourable destination and if India plays its card smartly, then it can become phone manufacturing hub. Though company like Apple have been dead to make iphone here historically but its contract manufacturer, Foxconn, had started making the iphone XR in chennai and rolled out the entire 11 series from India. 

A recent UBS report has gone so far as to label India as the leading destination for companies that want to move out of China as India's foreign direct investment doubled in 2019. The migration involved not just smartphones or electronics, but a wide range of industries from food to pharmaceuticals. Still it is too early to say anything but what else we can have, A HOPE!