World’s biggest coronavirus lockdown 2.0: India Inc welcomes the step; calls for economic relief package
While India Inc demands immediate government’s intervention as businesses across the sectors are collapsing due to the lockdown, some see this as an opportunity to ‘innovate
Anushruti Singh April 18, 2020
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Earlier this week, India extended the nationwide lockdown until May 3 as the number of coronavirus cases crossed 10,000, despite a three-week shutdown. The 1.3 billion-people country may have much lower number of coronavirus infected cases and deaths, but India needs stringent measures to safeguard establishments and people from any future virus crisis, expresses India Inc on lockdown extension announcement.
While addressing the nation, Prime Minister Narendra, although, did not announce immediate relief to the millions of people who have lost their jobs because of the shutdown of the 2.9 trillion economy; but said that he felt their “pain, with poor families struggling to afford food, and many migrant workers unable to reach their villages.”
However, late last month, the government announced a Rs 1.7 lakh-crore package aimed at providing relief to those hit hard by the lockdown, and insurance cover for healthcare professionals, who are handling virus-infected people.
On the extension of the lockdown, several industry stakeholders believe it was an “inevitable step” but at the same time there is an urgent economic relief package needed in order to protect jobs and small businesses.
The industry demands economic package
According the Federation of Indian Chambers of Commerce and Industry (FICCI) estimates, India may be losing close to Rs 40,000 crore daily due to the 21-day lockdown. And, the loss could be to the tune of Rs 7 lakh crore to Rs 8 lakh crore.
“It is also expected that close to four crore jobs are at risk during the April to September period,” FICCI president Sangita Reddy said.
Hence, an urgent relief package is critical. “The Prime Minister’s directions on graded opening will help start some production activity, to ensure that as soon as lockdown opens, there are no shortages faced,” she added.
On the other hand, Chandrajit Banerjee, director general at the Confederation of Indian Industry, also believed that the PM’s guidance on exit from the lockdown after April 20 will help the industry plan better.
“The extension gives the government adequate preparation time to organize an orderly and safe restart of the economy as and when health conditions permit. The industry too can devise its strategies for commencing operations accordingly during this extension period,”Chandrajit Banerjee, Director General at the Confederation of Indian Industry
While FIEO president Sharad Kumar Saraf expressed his disappointed with the deferment of the decision to extend the selective opening of the industry.
“Non-adherence to the delivery schedule for exports will result in cancellation, penalties and market loss, besides the business loss to enterprises,” he said, while also adding that the exporters – particularly MSME exporters – have no liquidity to pay wages for the month of April as they are unable to conduct any business activity during the lockdown.
“The start of selective manufacturing will also be a long-drawn battle due to the unavailability of labour, raw material and transport which will resume normalcy only after a few months of selective opening.”
Shifting of the goalpost will not help in avoiding stark realities which we have to face whenever we open, asserted Saraf.
There is a need for a comprehensive economic package to help the economy with interest-free credit to cover six months of wages, rent and utilities along with a moratorium to repay in installments after six months, he said.
Without such support, said Saraf, the government should not expect the industry to pay wages during the lockdown and any coercive action to bring about the same will only be counter productive.
Hospitality – the revival in question; demands intervention
The hospitality and tourism – that has been the most hit sector dur to the deadly coronavirus – accounts for 12.75 per cent of direct and indirect employment. The industry is staring at a potential job loss of around 38 million, which is 70 per cent of the total workforce.
However, the fraternity supports the extension with the heavy heart.
“We support the PM’s decision to extend the lockdown until May 3rd and stand by it as we understand that the country’s first priority is containing the spread of the virus any further,” says Gurbaxish Singh Kohli, VP, Federation of Hotel and Restaurant Associations of India (FHRAI).
However, the revival of the industry – with every necessary extension – will become more difficult, especially when there is no announcement for “specific relief,” he adds.
The hospitality industry has been the worst hit and a lot of damage is already done. Businesses have come to a standstill and revenues have already hit rock bottom. “With this new extension, besides the revenues, employment too will get jeopardized.”
According to the World Travel & Tourism Council (WTTC), as many as 75 million travel and tourism jobs are at risk worldwide, one in eight of them in India. Keeping this in mind, Kohli believes that only timely government intervention can give the sector a new lease of life.
“Our hotels and restaurants are at the helm, assisting the authorities with the required rooms for doctors and healthcare workers and food for various sections so that no one goes unfed. I appeal to the PM to kindly review the order on full wages to be paid to all workers during the lockdown as without revenue, it becomes impossible to maintain full salaries of workers,” he states.
With no government intervention, the industry may well be heading towards a collapse, which will be extremely difficult to revive, Kohli quips.
Resumption of construction activity a relief for real estate
“The extension of the nationwide lockdown was bound to be extended as we are still a few days away from flattening the curve. The government’s decision is calibrated and prudent,” Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.
Having said that, the gradual opening of economic activity, including resumption of construction activity at project sites, is a welcome step. Agarwal further adds, “The beginning of construction activity has multiple advantages as it brings wages to labourers, cash flow to developers, much needed credit growth for banks and resumption of economic activity in the country.”
In addition, the government should look at targeted relief measures for the real estate sector to ensure the industry continues to remain a leading employment generator and the effect of the lockdown do not further hamper the prospects of this category, he shares.
While Anuj Khetan, director, Vijay Khetan Group, while hailing the extension decision, also hopes the government to addresses the liquidity crisis in the sector and provide some relief measures to the real estate sector.
He believes that resumption of construction activities in areas that have been least impacted will bring a major respite to the construction workers, who are stranded in the mid of a catastrophe as they survive on daily payments from the contractor. This will, in turn, benefit the developer community, as well as ensure some cashflow in the sector.
Lockdown extension: an inevitable step
The lockdown has affected multiple sectors, but the extension has pros and cons both.
With the extension, businesses may take several months to recover from this event with manufacturing units shut, supply chain being disrupted, imports getting stalled and a slowdown in exports, according Kishan Jain, Director at Goldmedal Electricals.
“The government on its part could look at a host of measures to cushion the impact on small businesses considering that a large number of companies operate with a one to two-month cash flow.” Jain further emphasizes:
- The provision of liquidity and a steady cash flow to SMEs and MSMEs, especially domestic manufacturers.
- With a good proportion of enterprises looking for financial assistance from the government, deferring or relieving loan repayments would be a welcome move.
- Incentives must be provided to help the manufacturing sector bounce back quickly.
“This situation also throws open an opportunity for India to lower its dependence on imports of both essential and non-essential commodities, while promoting indigenous manufacturing,” Jain believes.
ZOOOK, a consumer electronic products manufacturer, is another company which has been badly impacted, but the company’s country head Achin Gupta believes that the lockdown is the “only option to contain this highly contagious virus.”
“The lockdown of 21 days has already hit the bottom line of the corporates and the further extension will be a major blow as the fixed expenses are there to stay. The major corporates will be forced to cut salaries and even after the business resumes it will take a few months to operate as usual due to which a lot of lay-offs are expected to happen,” he adds
Co-working startups seek government support
In past few years, co-working spaces have gained much momentum. But it is also one of the worst affected segments.
This pandemic has taken most startups aback, and it will take atleast three months to recover the one-month loss caused due to the lockdown – hinting at bleak future of startups. Hence, the co-working startup community demands support and some financial relief for the next three to six months at least.
Akshit Mehta, who is the founder of Mumbai’s three co-working space called Vorq Space, says, “In India, 80 per cent of the economy depends on SMEs. The remaining 20 per cent depends on big companies. These SMEs generate almost 50 per cent of the employment of the nation and have been affected the worst. For the economy to fight back, such SMEs would need huge support from the government.”
As an industry, it shouldn’t also be forgotten that a large cohort of startups works out of co-working spaces. This fact should be brought up when we engage with the government while seeking relief, as this will enable us to pass on some of the benefits to startups and SMEs.
Ideation, innovation key pillars to kickstart economy
On the other hand, there are some startups that this is crisis as an opportunity.
Pune-based door-to-door diesel delivery startup Repos Energy’s co-founder Chetan Walunj says that the extension of lockdown will be impacted on three major things. Firstly, it will affect the economy, which will result in unemployment. With unemployment, the normal business ecosystem will get affected. This has already been disrupted and the extension will only deepen the damage.
However, there is a positive side of the situation.
He feels the situation should be explored to find innovative ideas to support the economy. The most important thing is to plan all this in reverse order. The questions we need to ask is how to raise the economy through innovative ideas. Startups can pitch in and provide support through new solutions and fill these gaps. More startups should be involved in ideation and creating employment.
“This is also the time when the world economy has stalled. It would be interesting to tap the global market approach in such a scenario,” Walunj adds.
Similarly, agritech companies and startups are also unscathed in this crisis. As agricultural activities come under essential services, agri-tech companies are seeing immense opportunities such as providing solutions to ensure smooth functionality of the supply chain.
Amith Agarwal, co-founder and CEO, Agribazaar, an online mandi aggregator, says, “India’s farm sector faces minimum disruption during India’s fight against Covid-19. By encouraging e-NAM procurement, PM has given a fillip to agri-tech in India’s agriculture. Electronic procurement will ensure the farmer’s safety and health due to social distancing and also avoid overcrowding in the physical mandis.”
Agribazaar is committed to the government’s effort to procure the last available grain of the Indian farmer, says Agarwal. Thus, he appeals to local authorities to ensure logistics and on-ground support to our vehicles and staff,” he
Prepare for post-Covid security
As the government announces lockdown extension, Indian education institutes trusts that extension period will serve the purpose well and will help the country prepare for post-Covid security.
Professor PB Sharma, vice chancellor at Amity University, Gurugram informs, “The prolonged lockdown due to Covid-19 is a wakeup call to boost the security measures for any future microbial virus attack. We need to make our campuses free from such attacks in future, and thus the necessary preparation related to microbial security should be made now.”
Among other measures, the country needs to draw SoPs for microbial safeguards for industries, corporates and also for the educational institutions to prevent entry of infected goods and people once lockdown is removed by the government, Prof Sharma concludes.