India Inc. takes predictions about the advent of the COVID-19 third wave in its stride, bring it on, it says.
The outbreak of the pandemic has not been an easy time for the industrial sector in India. The second wave of COVID-19 has only added to its woes, taking a heavy toll on it, not just economically but emotionally as well. However, as of now India Inc. has learnt many valuable lessons and is transforming and adapting itself to survive. Now experts are predicting the advent of an inevitable third wave. Is India Inc. ready for it? We spoke to some insiders for some insights into this predicament.
Anushruti Singh June 5, 2021
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“We should prepare for the new (third) wave,” alerted K. Vijay Raghavan, the Principal Scientific Advisor to the government earlier in the first week of May. As a vigilante of the current pandemic situation, he forewarned that the third wave is inevitable, though he did not elaborate on its proposed timeline.
Likewise, epidemiologist and VP (Research & Policy) at the Public Health Foundation of India, Prof D. Prabhakaran stresses on the need for the country to be prepared for the third wave, in terms of buffer drug stock, medical infrastructure and volunteers and training the local communities to manage the situation.
All this as we continue to deal with an unabating number of daily COVID infections, with the number of new cases yet to go below 1.7 lakh per day.
There are chances that the third wave might come in the next 6-8 months, as predicted by Prof M. Vidyasagar, Scientist and head of the National COVID-19 Supermodel Committee. “If the vaccination drive against the coronavirus is not ramped up and COVID-19 appropriate behaviour is not maintained, there is a possibility of a third wave of the pandemic striking us all,” he stated recently, citing an Italian research paper.
These statements from experts are a dire warning at a time when the second wave has already brought India to its knees.
The disruption wreaked by the pandemic has not only been economic but has been an emotional rollercoaster for all Indians as well.
“The country let its guard down in early 2021 with everyone announcing India’s victory over COVID and that the economy will see a V shaped recovery in 2021. Then the second wave brought forth the heart-rending scenes meted out by a failing health infrastructure riddled with shortages of hospital beds, oxygen cylinders and medicines,”says Vipula Sharma, Director – Ratings and Head – Infrastructure Ratings at Brickwork Ratings India Pvt Limited.
After an unprecedented economic downturn in 2020, people and industries were hoping for a reopening of the markets this year but are now once again facing the same challenges as last year, leading to a massive loss of revenue and livelihoods. The seriousness and scale of this loss can be gauged by the fact that poverty is on the rise in India, while the middle class is shrinking. As per the Pew Research Center, the first wave pushed around 75 million Indians into poverty.
Not surprisingly, the unemployment rate has moved into double digits.
Centre for Monitoring Indian Economy (CMIE) data suggests that the unemployment rate spiked suddenly on the 2nd and 3rd week of May. On May 16th, the unemployment rate was 14.5 per cent; in the third week ending on May 23rd, it went up to 14.7 per cent. Earlier, in the week ending on May 9th, it was 8.7 per cent.
Mahesh Vyas, MD and CEO of CMIE writes that this is not normal for India. “The only time the unemployment rate lurched into double-digits was when India was shut down by a stringent nationwide lockdown during April and May 2020. There is no similarly draconian lockdown now although there are several local restrictions that restrain mobility in varying but distinctly milder degrees. The double-digit unemployment rate seen in recent times indicates that even these restrictions are taking a toll on the economy,” he states in his blog.
So, what does this mean for the economic growth of India?
Even if there is no national lockdown, localised restrictions and mini lockdowns have had a huge impact on business continuity. As per the Dun & Bradstreet COVID-19 business disruption tracker, 47 per cent of businesses were disrupted in the first week of May, with 52 per cent of estimated sales revenues and 56 per cent of employees of associated firms being impacted as a result.
Economic experts, global agencies and institutions have already made downward revisions to India’s economic growth.
Moody’s Investor services cut down the growth forecast for the current financial year to 9.3 per cent from previous estimates of 13.7 per cent. Brickwork Ratings too slashed the GDP growth projection to 9 per cent from an earlier estimate of 11 per cent.
Similarly Dun & Bradstreet in its analysis finds it onerous for India’s growth prospects to return to pre-pandemic levels. The curtailment of investment activity as the government prioritises managing the pandemic is likely to delay the revival of industrial activity. Dun & Bradstreet, thus expects the Index of Industrial Production (IIP) to have grown by more than 100 per cent during April 2021.
Owing to the intensifying nature of the pandemic and it spreading to rural areas, Dr. Arun Singh, Global Chief Economist at D&B, expects bleak prospects for FY22. “Mounting healthcare expenses, a weak labour market, input price pressures, the increasing debt levels of households, firms and the government, and more importantly, the spread of the infection to rural areas have severely undermined the growth prospects of the Indian economy. We have revised India’s growth down as compared to our earlier estimates. If the 3rd wave were to occur, it would further delay the return to pre-pandemic levels,” he said.
“This has not been easy. All businesses have seen slowdowns like never before,” remarks Brickwork’s Sharma, after taking stock of the pandemic’s impact so far. “The larger businesses in the service and manufacturing sectors have been able to weather the slowdown. However, several small and medium sector enterprises have not been able to do the same,” she says.
The key affected sectors like hospitality, travel and tourism, aviation, automobile, and real estate would require a lot of hand holding and support to come out of this complete shutdown. Bankruptcy, job losses and unemployment in these sectors are further adding to its woes. The challenges of the lack of international and domestic demand, logistic hurdles, supply woes and unavailability of key services have affected practically every sector. Loss of key employees to the pandemic has been another big challenge.
Recovery depends upon resilience
The Reserve Bank of India notes that even if economic activity in the first half of the first quarter of 2021-22 is dented, it is not debilitated.
The biggest toll of the second wave has been in terms of demand shock—loss of mobility, discretionary spending, and employment, besides inventory accumulation. While the aggregate supply is less impacted according to an RBI analysis.
“The impact of the second wave on the real economy seems to be limited so far in comparison with the first wave,” RBI states in the State of the Economy Report.
Evidently, the localised nature of the lockdowns, better adaptation of people to work-from-home protocols, online delivery models, e-commerce, and digital payments, have worked in favour of the economy, thus limiting the momentum of economic loss.
According to the central bank, India’s growth chances majorly depend on how fast it can arrest the second wave of the COVID-19 pandemic, where faster vaccinations are the key. But the real question is about the survival and recovery of the industries if the third wave comes.
Is India inc. ready for the third wave?
The first wave was a shock to the economy, where it contracted by 24.4 per cent y-o-y, the biggest downturn amongst G20 countries. The second wave has been more unrelenting, especially for MSMEs. However, several activity indicators such as GST, manufacturing, and service production, even in the face of restrictions, maintained their own.
Which only points towards the resilience and preparedness of the industrial sector to weather all storms.
“This seems to have shocked the urban powers to be out of their stupor,” says Sharma of Brickworks Ratings, talking about their preparedness. In her opinion, this is how we are learning to survive with the aid of best practices.
“Now the key metros of the country seem to have at least recognised their inadequacies and have set up a system to cope. While the third-tier towns and rural centres will have some catching up to do, we are better prepared than we were a few months back,” she feels.
Primarily, after the arrival of the third wave, the readiness and probability of faster revival solely depends on how fast the sector transforms itself. Dun & Bradstreet’s survey, conducted before the onset of the second wave revealed that firms were optimistic regarding their performance in the future. This was on account of the faster upgradation and adoption of digital strategies.
“We believe that the optimism levels of India Inc. have been higher as they are likely to have learnt to adapt to the new normal and the proliferation of digitisation is supporting business continuity. While business continuity during the second wave seems to be less impacted as compared to last year, the overall growth prospects have deteriorated from the levels perceived during the beginning of 2021,” Dr. Singh says.
Where there is a will there is way
Moving along, various industry mavens from different sectors unanimously think that India Inc. has learnt many lessons from the pandemic, and it can certainly handle the challenges if the third wave arrives in the near future. They spoke to SME Futures about their preparedness to deal with this eventuality.
The manufacturing sector, which took a massive hit and witnessed the mass exodus of skilled workers due to the pandemic, has been adopting SoPs and contingency plans along with making allowances for other aspects as well.
For instance, the Indian Agarbathi sector, which has a majorly female workforce, has regained nearly 90 per cent of its pre-COVID sales, attributing it to the fact that consumers have continued to use agarbathis for worship, wellbeing, and fragrance purposes.
“Despite the COVID-19 induced challenges like lockdowns as well as logistic hurdles, the industry has managed to maintain its sales. Though, like all industries we constantly assess the situation and take the necessary steps keeping in mind the welfare of all the stake holders,”says Arjun Ranga, President, All India Agarbathi Manufacturers Association (AIAMA).
With a CAGR of around 3.6 per cent, the Indian agarbathi sector has been growing significantly over the years. The current retail value of the industry is around Rs 7,500 crores and with a revenue of Rs 1000 crores in exports, the industry is also one of the leading exporters of the country.
Talking about their readiness for the third wave, he hopes that the agarbathi sector will continue to exhibit its resilient nature. “More than preparing for the third wave, we should all work towards preventing the onset of a third wave. Strict adherence to employee and partner safety protocols, stringent social distancing, regular shop floor sanitisation and vaccination can help in averting the onset of another wave to a great extent,” Ranga suggests.
Likewise, Raghav Gupta, Director at Kanchan Metals also accepts that the first and the second wave caused a huge disruption. “For the food supply chain, it was beyond what any of us could have anticipated or prepared for,” he says. However, Gupta also opines that lessons were learned and the manufacturing sector took steps to adapt to the new conditions. Where, tech-led innovations have supported the industry to rise above the challenges that were posed the first time around.
On the speculations about the third wave, Gupta says that the industry players are bracing themselves for whatever is to come. “We have begun stockpiling on essentials so that we can deliver the same to the customers when the time comes. we are building just-in-time inventories that help minimise storage costs. Wherever possible we have automated operations to also protect our staff. So, preparations are underway, and we hope to be ready for the third wave,” he asserts.
The same goes for the real estate sector as well, which started on an impressive note this year. However, the second wave obstructed the growth of the industry to some extent.
Ashok Mohanani, President, NAREDCO Maharashtra tells us that the sector’s hopes are pinned on faster vaccinations and the upcoming festive seasons. “The country is expected to be affected by a third wave of the pandemic around July-August. Hence, we are working closely with the government to procure vaccination slots for the industry-wage workers,” he asserts.
The apex body has also written to the government to allow the vaccination of labourers at the construction sites. “We are hoping for some recovery in the third quarter, as the festive season approaches. The industry has already adapted to digital tools and virtual marketing practices. We are making the necessary efforts to regulate the much-needed model of the real estate industry.” Mohanani informs us.
The digital way is the right way
Digital transformation is the one strategy that has aided organisations to scale down the impact of the pandemic upon them. Every sector, from BFSI to auto to retail, has adopted the hybrid working model. In fact, SMEs and the government too are adopting the hybrid model and are strengthening their digital armour.
Rajiv Kumar, Founder & CEO, StoreHippo, an e-commerce solution provider states, “With the recent experiences during the 2 waves of the pandemic, industries have learnt how to stay afloat and bounce back as soon as the wave ebbs. Taking the online route and going D2C has opened up new markets for businesses across industry verticals.”
In 2020, 94.7 per cent of Indian organisations fast-tracked some level of digital transformation programmes. Further, 92.3 per cent are reinventing their business models. These staggering statistics indicate an unprecedented scale of change in the organisational landscape, according to a report – Intelligent Automation: The Future of Digitalization– released by PWC and IAMAI.
To prepare for the third wave, if it is inevitable, the businesses that have not yet built their online presence should work on speeding up their digital launch. Kumar comments, “They should work out a streamlined payment and supply chain to fulfil their customers’ demands. Leveraging M-commerce is the key as the mobile is where the modern customers are. With the pandemic, newer customer segments have opened up to digital shopping and brands and SMEs should make the most of it. The need of the hour is to choose an advanced e-commerce solution and build an online presence to stay afloat during the third wave.”
Experts too feel that new age companies equipped with advance tech solutions will be doing better in case the economy experiences further downturns. Satya Yerramsetti, Founder & CEO, Telebu, a communications solution provider feels that if industries are adaptable, agile, and automated, they can definitely weather the storm.
“The industries are better prepared for the inevitable third wave. Unlike last year, we are confident that this wave will not be a setback for us. The past two waves have definitely acquainted us with some innovative methods of operations which I am sure will come to our aid if the third wave strikes us,” he says.
He continues, “Additionally, we feel that at an industry level, we are better equipped to overcome the situation and can thus be optimistic about normalcy returning soon. Technology, which was a constant support during this scenario, will continue to be a pillar of support in our operations, even in the future.”
Risk management is imperative
Besides their enthusiasm and tech and digital adoptions, sectors today are also giving value to crisis management practices, which is turning even small businesses into flexible businesses.
There are 65 million small and medium enterprises in India, employing more than 45 per cent of India’s workforce. These SMEs are working relentlessly to make an impression in the world market with risk-taking being a part of the entrepreneur’s DNA.
Hersh Shah, CEO, Institute of Risk Management – India Affiliate talks to us, “COVID-19 has taught us the importance of having crisis management plans and risk mitigation strategies for every event and in my view, we are already preparing for a potential third wave.”
However, small businesses should focus more on their business strategies, otherwise survival is an arduous task in uncertain times.
According to Shah, right now, the major challenge for them is succession planning. “As many as 35 per cent of SMEs feel succession planning is their biggest problem and that SMEs largely have an owner or promoter-driven structure due to which the decision making is focused on them. Apart from this, supply chain risks, inventory management, manpower issues, and liquidity will continue to remain the major challenges for SMEs,” he explains.
Shah further states that it is very essential that the company’s communication during such times is clear and transparent. He says, “Further preparedness for constant change while remaining sustainable is key for SMEs. These businesses should also establish the importance of good and effective corporate governance and long-term stakeholder management with effective implementation.”
Unrest in the hospitality sector
For the hospitality and travel industry, this pandemic has proven to be a nightmare. Many establishments were washed out in 2020, while those who reopened are not finding any respite due to the impact of the second wave. Now if the third wave comes, this sector is going to collapse.
“Hospitality is the most severely affected sector, the first one to shut down and the last one to reopen. Operations under the current restrictive environment is akin to closure. We are a capital- and labour-intensive industry, but we have been left to fend for ourselves. I would assume that in the second wave almost 50 per cent of businesses are temporarily shut in order to survive. If in such circumstances, a third wave comes, you will be writing an obituary for this industry. The sector will not be able to deal with the after-effects, it requires heavy hand holding from the government.”says, Gurbaxsh Singh Kohli, Vice President of the Federation of Hotel & Restaurant Associations of India (FHRAI).
The hospitality and travel industry contributes around 10 per cent to the GDP, while it employs 12.75 per cent of the total Indian workforce. However, after the coronavirus outbreak, the sector is finding it hard to get back on track. As per estimates, the total revenue of the hotel industry for FY 2019-20 stood at Rs.1.82 lakh Cr. However, in FY 2020-21, approximately 75 per cent of the industry’s revenues got wiped off. That is a more than Rs.1.30 lakh Cr revenue hit.
Opportunity to transform
Undoubtedly the pandemic has exposed shortcomings in the ways that India did business. But it also gave us a huge opportunity to change and transform for the better and experts too feel the same.
“Indian industry should view this disruption as an opportunity to reinvent itself,” says Sharma of Brickwork’s. She further feels that this has brought forth an entirely new concept of doing business from anywhere with anyone at any time, which has radically changed the existing paradigms. This In turn has made businesses more capable of facing and overcoming the next wave when it arrives.
“We have recognised that several segments are able to work as efficiently or even better in the work from home environment. So, do we need the glass behemoths of commercial offices to build businesses? Environmental consciousness and social responsibility have again come on the business radar with the wake-up call that we are not invincible, and nature fights back. This is an opportunity to reorient businesses to be socially responsible and environmentally sustainable,” she asserts.
In the present scenario, businesses are adopting every kind of change to survive, which makes sense.
Large enterprises are cultivating culture around health and wellness, by announcing health support for employees and their families. For retaining their skilled workers, firms have been providing sanitised and safe dwellings at their work sites, so that migrations do not happen again.
Sectors have continued their businesses by strengthening remote working and security infrastructure and enabling the work from home culture. Business travel and conventions have been replaced with video conferencing and webinars. Although temporarily, these possibilities have been explored and may find themselves becoming permanent fixtures of all organisational meetings and functions in the future.
Having said that, industries have had the time to equip and prepare themselves for the third wave. And with most of the adult population getting vaccinated, the next wave may not hit the country as badly as the second wave did.
Overall, with the vaccination drive as key to overcome the pandemic, and the various sectors transforming themselves, Indian industry has a better chance to face the third wave, which according to the experts is inevitable.