The overall Indian economy has come to a halt as the nation sees the outbreak of fatal disease COVID-19. The major hit sectors include tourism, transportation, hospitality, and aviation sectors.
The hospitality sector is projected to be at a loss of over Rs 30,000 crores of revenue this year. India’s aviation sector will witness the loss of more than Rs 8,200 in the quarter time this year. The primary reason for this loss is that international and domestic flights are grounded.
The shutdown will be a nightmare for the employees across these sectors as well. The (NRAI) National Restaurants Association of India has warned the loss of jobs to over 10-20% employees out of 7.3 million employees in the restaurant business. This number counts up to 15 lakh people being unemployed.
The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. India’s growth in the fourth quarter of the fiscal year 2020 went down to 3.1% according to the Ministry of Statistics. On 26 May, CRISIL announced that this will perhaps be India’s worst recession since independence.
Notably, Novel coronavirus, which causes COVID-19, has come at a time when the Indian economy is already low with quarterly GDP growth of just 4.7%.
Shaktikanta Das, RBI Governor, said that India is not immune to this pandemic situation and may face a slowdown in domestic growth. India’s economic health is also under question in the next financial year.
Many people have decided to buy FMCG products in advance. This panic buying has increased demand for the goods. Besides, many OTT platforms have also witnessed a rise in subscriptions as most companies are offering work from home to their employees. But this is not all. On the other hand, tourism, aviation, automobile, apparel, gems and jewelry, and even pharmaceutical companies have started witnessing a reduction in their business.
Let’s now take a look at how coronavirus is destroying the important industries in India:
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The aviation industry needs to be on this list. With the outbreak of coronavirus in Wuhan and its spread from there to more than 167 countries, airlines have got bad news. Since the virus has only got into our country with people coming from abroad, the country has placed travel and visa restrictions. These restrictions have led to fares crash by 40% on certain air routes. Several aviation companies, such as SpiceJet, GoAir, and Vistara, have suspended their international flights as a result of decreasing demands and fares.
As per global aviation consultancy, private domestic carriers are expected to incur a loss of around Rs 4,500 crore in just a quarter. And for the national flag carrier, the estimated loss is Rs 3,700 crore for the same period. This totals up to Rs 8,200 crore. These losses primarily are because of reduced flight schedules, new bookings, rescheduled flights, and large-scale cancellations.
Restrictions on travel have obviously impacted the hospitality sector. According to the estimates by the hospitality sector, the hotel chains in India will share a loss of up to Rs. 470 crores. The coronavirus outbreak can lead to 18-20% of deterioration of occupancy and 12-14% drop in ADRs for the entire 2020. The hospitality sector is likely to be impacted by the cancellations of rooms and drop in the room rates.
Accounting for 10% of India’s GDP, the Tourism sector is also adversely affected by the outbreak of coronavirus. The growing visa restrictions and new travel advisory are significant reasons for this. India has suspended visas from all countries to India which is also one of the major reasons for this. In a nutshell, India is witnessing an all-time high drop in the number of tourists travelling to the country.
Thus, there would be low numbers of foreign tourists in India as well. From luxury hotels in Udaipur to Goa and Kerala, the room rates in Indian hospitality have decreased to nearly 18%. As said above, the situation is even worse in the aviation sector, where fares have crashed by 40%.
With more people stocking FMCG which are essentials, they have stopped going to car dealerships. According to the Automobile Dealers Association, footfalls in dealerships have gone down by 45% in the mid of the month of March. This has led to a decline in sales of up to 70%. The automobile industry was preparing for the transition to BS-IV emission norms from April 1, 2020. But there are no buyers for these cars. The dealers asked for some relaxation for liquidating the stock, but the Supreme Court has refused.
In simple words, BS-IV vehicles can’t be registered after March 31, 2020. So, the dealers want to sell them before. FADA (Federation of Automobile Dealers Associations of India) approached the apex court with a plea to extend the deadline for the registration of the vehicles. So, the dealers now feel their BS-IV stock will not be cleared. Even now, the transition to the BS-IV regime seems difficult as the supply of parts and vehicles are from China, from where the disease started.
The value chain in the apparel industry erupted due to disruption in exports and imports. India exported garments around $16.2 billion in 2018-19. Notably, the apparel sector exports contribute nearly 43% to India’s textiles exports. It is also one of the largest employment providers employing around 128 lakh workers. Significantly. 65-70% employed people are women.
But the growing restrictions due to coronavirus is likely to take a toll on export and import of raw material. Besides, buyers too, are staying away from shops to avoid community transmission of the disease. So, suppliers planning to introduce summer collections find it hard to get customers. This had put pressure on the Indian apparel industry.
The Indian Pharmaceutical industry was initially facing troubles in importing material from China. Well, this problem is solved now. However, the uncertainties on the exports front have grown, especially in the Europe and US market. There are travel restrictions between the US and Europe, which amplify the problem.
The inventory turnover in India is only marginally down. However, sufficient stocks categories are facing problems for more than a month now. Industry bodies have ruled out the rise in the prices of the medicines as they are governed by price control.
Gems & Jewellery
Buyers are not going to any retail stores, which has led to a decrease in the retail sales of gems and jewellery to over 80%. On the export front, this industry also fears the loss of up to 50% amid strict government restrictions.
Fast Moving Consumer Goods
Unlike any other sector in India, the FMCG sector is likely to gain from the current situation. People are buying extra stuff for their house, which has led to increased consumption of the products across the country. People are collecting daily food items, such as rice, curd, milk, lentils, oils, etc. and personal care products, such as hand wash, soaps, and sanitisers are in great demand these days.
Online inventory grocery stores have also witnessed a huge influx of consumers as they are avoiding the traditional brick-and-mortar way of buying. E-commerce stores are also complaining of running out of stock essentials such as hand sanitisers and handwash. All of this has led to an increase in the production of the goods to keep up with the demand. It is reported that Amul has reportedly increased its production by over 20% to meet the new and increased demands. ITC has also doubled its production across the personal and food business to ensure timely availability. Godrej consumer was planning to increase soap prices. However, the plan is now shelved, and the company has instead increased its production. However, there would be a decrease in demand in the time to come as people have already stocked up for later.
As most companies have announced work from home, OTT platforms have seen a rise in demand and subscription. The government has shut down multiplexes which have also contributed towards the rise in the demand for OTT platforms. As most of the Indian states have announced lockdown, this trend is only expected to pick up. However, providing new content on these platforms would be a problem.
The cases of coronavirus are continually rising in India. Most states have announced lockdown, and the government has seized the borders as well. It seems like the situation is not going to change any soon. The Indian economy is likely to suffer for a long time as even once the situation is controlled, it will take a long time for everything to come normal.