Anushruti Singh
As India registered second largest number of coronavirus cases and became a new hotspot, its prospects for a rapid economic growth are looking bleak. Various agencies have speculated further negative growth of Gross Domestic Product (GDP). The release of first quarter results suggests a decline of 23.9 per cent in GDP.
Asian Development Bank has predicted economy to contract by 9 per cent. The domestic rating agency ICRA also expects a contraction of 11 per cent in FY21. The contraction in the GDP is the result of lack of economic activity due to a lockdown imposed to curb the spread of virus.
Most of the sectors are slowly crawling to normalcy but sectors such as real estate, construction, hotels, transport, services etc will recover in the longest span of time. Swapna More, State Chairperson, Maharashtra of Confederation of Indian Micro, Small and Medium Enterprises (CIMSME), and Co-founder at KAGAAY, gamified realty sales platform talks to SME Futures about latest developments in Indian economy.
Edited excerpts
The results in the first quarter for GDP were negative. Owing to this, government and industries are collectively trying to revive economy. What is your take on the momentum of the economic recovery?
Economic recovery is more challenging in emerging markets of countries like India than in other advanced countries. Despite all the hurdles, India will be one of the few countries from emerging markets to register a strong momentum in the growth of GDP during the second half of 2020. This is expected to continue during the entire year of 2021.
The economic recovery is already underway but its effectiveness largely depends on containment of the virus. Along with this, the rising tension between India and China will play a huge role in how rapidly the economy will recover. However, the success of Indian government’s initiative of being Atmanirbhar or being self-sufficient will primarily rely on recovery of our economy.
One of the biggest challenges of industries today is collapsed demand. What according to you should be corrective measures to overcome the challenge?
The best way to tackle this challenge is by boosting domestic demand. This has to be achieved by empowering those who are at the bottom of social pyramid. One of the ways to do this is by increasing income of extremely low-wage workers. The minimum wage can be linked to consumption expenditure of economically superior workers. So, the increase in minimum wage will enhance the consumption of goods among economically superior workers.
Most of the MSMEs barely made it through the crisis even with help of government’s economic package. Do you foresee economy crumbling for the second time in such a case?
The government packages and moratorium did come as a major relief but it won’t be enough to avoid bankruptcy of small businesses. Most of the small businesses are already on the verge of being shut down and next level of economic stress has almost started.
Unemployment is already on the rise and numbers are expected to go up. The increase in unemployment was one of the main reasons behind the contraction of our GDP. Unless the government comes up with financial help for these MSMEs, most of them will find it hard to stay afloat. This will have adverse impact on our economy further.
What kind of initiatives CIMSME has come up with to revitalise small businesses during past few months?
CIMSME has been active in helping small businesses for a considerable time now. It provides best practices through education, collaboration, mentorship, and sharing innovative ideas. Entrepreneur Development Programs (EDPs) are arranged for education of entrepreneurs. This education provides the necessary skills and learning to succeed.
This plays an important role in an uncertain environment because these programmes develop insights required to create opportunities for entrepreneurs. This also helps them in gaining the ability to successfully manage their own businesses. CIMSME has also launched NISTHHA clusters.
Clustering encourages networking among firms which helps them to take advantage of complementary skills, exploit new markets, and integrate activities, resources or knowledge. NISTTHA currently focuses on food industry, health care, artisans, service, and real estate. Other programmes such as MSME Manthan, and Global Leadership Dialogues Global Summits are also conducted by CIMSME.
As a serial entrepreneur, how do you see the future of entrepreneurship in post-covid era?
Over the past decade, there have been major transformations that have impacted the Indian entrepreneurship sector. These include technological reforms, the government and taxation policies like GST, ease of getting investments etc. All these developments have proved to be a fertile ground for entrepreneurial aspirants. Digitisation and automation has become an indispensable part of every organisation.
With the rise in spending power of consumers and with several alternatives to choose from among Indian and international brands, many business entities are joining hands with each other to combat the thriving competition. This in turn led business entities to focus largely on customer service so that they do not lose out on their customer base thus diversifying and spending more on innovation.
How will the real estate industry overcome the all-time low in sales and what according to you are new trends in it?
The real estate sector has taken a massive hit and it will take a year to get back on its feet. But as per the trend seen from the month of May, a minor segment of buyers could return in the market in next six to eight months. Smart homes and integrated townships will be the future as work from home will become a norm going forward. The markets in the top tier cities are likely to recover quickly as compared to tier 2 and tier 3 cities.
Will the incoming festive season nurture economic sentiments of India?
As per the current trends, it seems like this festive season will be a dull period in terms of economy. The increase in unemployment has crippled the demand for non-essential goods. The lower-income category of people is being pushed into deeper poverty due to the current situation.
The middle-income group is also grappling with this crisis. Therefore, they will defer the festive purchases which will bring only gloom to the lower-income group. Sectors like automobile, apparel and clothing, tourism, entertainment, and real estate will be a major hit. Otherwise, this usually is the peak time for business. The only industry which can make good use of this festive season is the online industry. But, it is an important phase for revival of our economy.
