It was a gory month for economies across the world and stock markets bore the brunt of it. They headed for a tailspin from the word go since the first news of the deadly pandemic broke into the scene. Benchmark BSE Sensex has had a steep dive of 13.2% on 23rd March, 2020, which was the biggest single day fall ever surpassing the infamous fall of 28th April, 1992 after the news of Harshad Mehta Scam. Nifty was no different when it declined almost 29% in the last three months of the FY20, overtaking the disaster of 1992. The severity was such that only one tenth of the Nifty stocks saw a surge while rest has bitten the dust. Covid-19 related necessity called ‘social distancing’ has made sure that factories and workplaces are shut across the world. As a result of that production has virtually come to standstill. The lack of movement of people has also curtailed the demand barring the items needed to survive. Other than the daily to use items, the public spending has decreased on most of the items. As a result of that only FMCG companies saw their stock surging whereas rest saw a steep decline. Top three gainers of Nifty in FY20 has been Nestle India, Bharti Airtel and HUL. As it can be seen, two out of these three are into FMCG. On the other hand, the most prominent sector among the losers are banking. In the last three months, Nifty bank index lost more than 40 percent of their market value where one third of the banking stocks related to the index nosedived more than 50 percent. The reasons are not difficult to visualize. Most of the medium scale and few of the large scale businesses has come to a standstill gradually for the past three months leading to the lockdown of 21 days presently. As a result of that, new loan growth has shrunk and loan repayments have also declined eroding the value of the assets. On top of that, a three months moratorium period on loanrepayments is offered by many banks as suggested by RBI. This has further dampened the growth prospects of banks. Most importantly, as people are not able to move out of their house or able to move out only cautiously, the propensity to hoard more cash has increased. This has not only put a halt to new deposit growths, it has also eroded the present deposits as more ATM withdrawal happened. In the meantime, the payment commitments by the banks have not reduced making it unsustainable for them to do business with ease. The asset erosion in the form of decline in quality of receivables and demand as well as time deposits, coupled with a burden of liability has created an asset-liability mismatch. The YES Bank fiasco at the same time has only aggravated the sorry outlook of the banking sector. Though government has bailed YES Bank out of the fiasco, few other banks have been asked to share the burden of it further damaging the financials of those banks including SBI. All these factors have made banking sector lose value consistently over the last three months. Among the other sectors, pharma may see a surge in near future if any covid-19 related medicine come in forefront. Overall, it may be a good time to invest as the unprecedented global economic meltdown due to the pandemic made sure that stocks are hitting the lowest it could after many years. Just like the purification in nature has taken place around the world, the grossly overvalued Indian stock market too probably needed the much needed correction.
Day: April 6, 2020
Is LOCKDOWN – ADDING SALT TO WOUND FOR SMEs
When in January 2020, I talked to one of my friend who is 1st Generation entrepreneur, he said he is planning to buy Maruti Suzuki Ciaz which is in Rs 8 – 9 lakh bracket. He runs a business of producing plastic balls, as an ancillary product of the plastic industry at Kalyani Industrial Estate. The maximum of his workers is from the locality.
Another known businessman of mine, who is my friend’s father, and runs a family business of manufacturing different parts for heavy-duty transformers, said he got the largest order from Indian Railwayin his business historyof around Rs 80 lakhs. He was also planning to renovate his house and to upgrade his bike to Royal Enfield Interceptor which is in the price bracket of Rs 3.10 Lakh.
As my research area is MSMEs and their financial conditions, seeing these instances I perceived the drivers of growth for the Indian Economy is maximizing their opportunities and performing well.
The situation drastically changed after February. The one who is in the business of plastic balls mainly depends on export along with local market supplies. With the advent of this pandemic, exports restricted and lately become zero. After lockdown, the production stopped, finished products although not perishable, stacked in the godown. Capital locked, clients are not taking delivery of the product ordered. And to my utter surprise, Indian Railway also stopped taking delivery of the order from the manufacturer of transformer units. Both have to stop their dreams of getting bike or car, and also repenting upon spending the advance booking amount paid. So, as entrepreneurs are also consumers, other industries also facing this slowdown.
The main problem of SMEs in India is lack of capital but along with that lack of working capital management is worsening the scenario. Both of the entrepreneurs have to maintain a payroll of around 40 employees, security guards, some employees are from outstation, they could not be able to go back to their native places, so arrangements are made for accommodation. So, the owners of the establishments have to incur costs. As a result, they are facing a working capital crunch.
To prevent the virus from community spreading lockdown is the call of the situation, but no planning or arrangements were made to phase out the problems occurring from this situation. The government is announcing bailout packages like 3 months’ moratorium for EMIs, but after 3 months the owners have to pay the pending EMIs so that they have to arrange for funds.
But there is no guarantee that after 3 months the situation will be at ease. Large companies can fight with the current situation as they are well planned and well managed. But 1st generation entrepreneurs or those who are in family run businesses never saw any situation like that. As a result, most of them are not prepared for this scenario.
The government is emphasizing Make In India concept, but in many cases, the incentives are not adequate to move away from assembling to local manufacturing. So when this change needs to be done, proper planning and infrastructure should be provided. In states like West Bengal, still, getting land for establishing a plant is difficult.
Thus COVID 19 puts in some big questions in the future of SMEs. It’s evident that in coming 3 to 4 months or if I am more pessimistic, in the next 6 months, there is minimal chance of improvement. As India is in the stage of community spreading, it is very hard to regain normal business during this period, where as, as per Government order payroll and other things to be maintained. So, owners will be taking a herculean task of maintaining their business. Many small firms will shut down, a lot of people will be retrenched, consumer spending will be less, production will be hampered, as a result, the economy will be in a mess. If the drivers of growth, who contribute more than 6.11% of manufacturing GDP, and 24.63% of service GDP with around 63.4 million units all over India, get a pink slip, then it is the evidence of a gloomy future. We can only hope that this situation fades out quickly enough so that we will be on a normal track soon.
COVID-19 Pandemic: Ten plausible life lessons we learned from the worldwide disease outbreak
Over the last couple of months, we all started talking about the COVID-19 pandemic as it suddenly changed many lives around the globe. Researchers decoded a ‘novel coronavirus’ behind all this chaos. People everywhere are being requested to stay home and stay away from other persons to reduce the risk of infection as this coronavirus outbreak has shifted from just a pandemic to a global epidemic. Many countries (Italy, China, UK, USA, France, Germany, Spain, and others) around the world are coming to a standstill, culminating in illness and unforeseen death. Even in India, the whole country is on lockdown to stop COVID-19 spread at stage-II.
Apart from all the negative outcomes of the COVID-19 pandemic, there are some important life lessons that we have learned so far:
- Taking care of our hygiene, whether there’s a virus or not.
This might sound silly, but before the pandemic, most people might not have known that soap destroys certain kinds of viruses and bacteria. We must wash our hands with soap followed by applying any alcohol-based hand sanitizers. We must learn the drill by now to keep ourselves safe from any viral or bacterial infection. Well, now we all do, and we’ll probably wash our hands a lot more frequently after this is “over.” Staying sudsy for at least 20 seconds is now part of our psyches.
- The social awareness in most of the Indian population is very less.
We must take a huge initiative to upright social awareness. In some critical situations, even fake news, rumor, hoax can act like an atom bomb to take away the lives of many people. This lack of awareness situation can be solved through an efficient collaboration between Government and private enterprises.
- Studying biological sciences at entry-level would have been our first choice.
Biological knowledge is not only a basic parameter of studying Bioscience but also it helps to satisfy many basic human needs and improve living standards. The recent outbreak of COVID-19 is one of the highlighted examples, where the application of the biological knowledge can only open the door of prevention as well as cure. If this scary situation has taught us anything, it’s that doctors and researchers will be the ones who will take us out of this mess. Along with the health workers, they are the ones working day and night to drive the recovery of the world to find a suitable coronavirus treatment.
- Taking a sick leave could save lives.
If you are feeling sick and diagnosed with any viral infection, then you must not come to your workplace. If possible, then talk to any of your colleagues who can take care of your work during your absence. You never know when staying home could save the lives of your colleagues.
- “Work from home” could be an option for many people.
During this lockdown period, many people learned that their jobs were possible to do from home. We could realize that most jobs have a certain amount of work that can easily be done from home without coming to the office. We could find some way just to promote our work-life balance.
- We may consider the internet facility as a human right.
According to a recent study conducted by the University of Birmingham, free internet access should be considered as a human right, provided it should not cost the human basic need like water, food, etc. In some states of India, the free Wi-Fi has been provided to people in major railway stations and bus stops.
- We must learn to appreciate Nature.
We keep on hurting our environment for the sake of our profit. We fill up ponds just to stand one skyscraper, deforestation we see in every corner of the globe, wastage of potable water, use of plastic is gradually destroying the aqua environment. But we should not forget that these never pay. If we don’t start realizing now, then we have to face the heat again shortly.
- The importance of talking to friends and relatives.
Psychologists and researchers have been saying this for many, many years we have a deep innate need to be around other people and share experiences, and indeed our lives. All the research shows that more connected people are happier and healthier in the long run. During this lockdown situation, the best way to combat loneliness is to be in regular contact with friends, family members, and relatives. Being alone, especially for extroverts can be exhausting and lonely. In true sense, social distancing can be very difficult, but it can also teach us a lot about ourselves. This is the time to have long talks and deep conversations to relax.
- The world is wildly connected.
We like to remember this one when it suits us when talking about the connectivity that technology allows or the global nature of business. But we are obviously all connected physically, too, as evidenced by the speedy spread of the virus around the globe. To think of countries as fundamentally separate from one another is fundamentally flawed. Once we internalize this, we’ll probably be better off, both psychologically and in our ability to plan for future pandemics.
- Life won’t be the same after and that’s ok.
People have been saying this since fairly early on into the saga, but it was hard to wrap one’s brain around it was much more comforting to imagine that we’d spring or soothing weather to live happily. But as “stay-at-home” orders extend, it’s easier to see that things have changed, some irreversibly, and for better and for worse.
Student Contributors:
Nancy Jaiswal (B.Tech Biotechnology, Sem-IV)
Swarnav Bhakta (M.Sc Biotechnology, Sem-II)
Vulnerability of Indian Economy in the Era of COVID-19
The Indian economy is going through a major slowdown from multiple directions and the companies are forced to take tough decisions in order to survive in the challenging circumstance as Corona virus disease COVID 19 brings a busy workforce to a standstill from the end of March, 2020. COVID-19 has resulted in an inevitable global shutdown frustrating businesses, investors, supply chains and Human Resource functions.
The outbreak has presented new roadblocks for the Indian workforce as job losses and salary cuts are likely in the high-risk services sectors such as airlines, tourisms, malls, multiplexes, restaurants, retailers, etc which have seen a sharp fall in demand due to lockdowns across the country. As companies are not meeting the revenue targets the employers may think of downsizing their workforce.
The financial market has experienced uncertainty about the future course and repercussions of COVID-19. India’s trade impact due to the outbreak have been affected most as a result of manufacturing slowdown in China that is disrupting world trade specially for the chemicals sector, textiles and apparel, the automotive sector, electrical machinery, leather products, metals and metal products and wood products and furniture. Indian Businesses are also facing reduced cash flows due to slowing economic activity which in turn is having an impact on all payments including to those for employees, interest, loan repayments and taxes.
Organizations have brought in a renewed focus on hygiene aspects concerning the pandemic and for some of the sectors, the work-from-home proposition is posing implementation challenges as it has a direct bearing on the business operations for manufacturing units where workers are required to be physically present at the
production sites, and services sectors like banking and IT where a lot of confidential data is used and remote working can enhance security threats. Hence, companies operating in these sectors are finding it difficult to implement work-from-home facilities without compromising on their day to day operations.
‘Corona virus’ is wreaking more chaos than usual and in this situation, HR leaders can help employers to manage the crisis and keep things operational. The Human Resources department now has a new responsibility to drive business continuity by helping employees feel comfortable and safe while ensuring that work continues at the usual speed. This is the ideal opportunity for brands to showcase their care for their employees and boost team loyalty. As a first step, most businesses around the world have now made it mandatory for employees to work from home. They have also issued a temporary ban on all business travel and face-to-face meetings with clients and customers. A combination of this event-related data alongside the Human Resource Information System data will create the ability to track over time the status of the workforce.
Despite the fear and mental stress surrounding the Corona virus outbreak, Businesses around the world have now recognized that work can be done as easily from home as at the office through platforms like Skype or Zoom, which further saves time and office resources. In the current environment, an employee-centric approach is crucial for brands to maintain employee trust and keep business going as usual. The HR department needs to provide consistent support to employees by facilitating work from home through appropriate technology and regular employee motivation. Thus, the more we can do to help each other and our communities, the better off we’ll be through the pandemic and beyond.
