Exactly six months ago, India imposed one of the world’s harshest lockdowns to arrest the spread of the Covid-19 pandemic. The measure did temporarily stall the growth of the novel coronavirus but triggered an economic crisis that has spread as rapidly as the virus itself. Two business quarters later, we are not just the second-worst-affected country in the world with 5.6 million cases and 90,000 deaths but also the worst hit among the G20 economies. The International Monetary Fund has estimated that India’s growth for the entire fiscal year will be -4.5 per cent. 2020 is clearly annus horribilis, a year unlike any we’ve seen in recent history, with its impact being felt across sectors. Three significant drivers of growth, domestic consumption, government expenditure and private investment, have taken a beating.
India Today October 5, 2020 cover, Hope and despair.
In order to understand the magnitude of the problem and the state of the economy, we decided to investigate all its major sectors. Our mission was to find out whether each of these sectors perhaps required specific measures. We took a dipstick survey of the economy to find out how badly various sectors have been hit by this unprecedented economic emergency. Our cover story, ‘Hope and Despair’, put together by Executive Editor M.G. Arun, examines 17 sectors that keep the wheels of the economy going: manufacturing, e-commerce, real estate, automotive, retail, fast-moving consumer goods, education, aviation, toys, healthcare, pharmaceuticals, transportation & logistics, gems & jewellery, footwear, textiles & apparel, travel & tourism and entertainment. Our correspondents across the country profiled and analysed each of these sectors to determine where they stood on our stress meter: from severe to moderate to no stress.
They discovered that the services sector, which employs 31 per cent of the country’s workforce and contributes 55 per cent to the Gross Value Added, is in the doldrums. Businesses like hospitality and aviation, which rely on business travellers and tourists flying around the country and staying in hotels, were hit the hardest. The revenue of Indian domestic airlines reduced from Rs 25,517 crore in April-June 2019 to Rs 3,651 crore in April-June 2020. The Confederation of Indian Industry (CII) estimates that the hotel industry will suffer a revenue loss of Rs 1.4 lakh crore because of the lack of events, room reservations and restricted travel.
Others, like the Rs 6.3 lakh crore gems & jewellery business, which employs 4.8 million people and contributes 3.1 per cent to the GDP, are reporting half their usual turnover because of the paralysis in the retail sector and the decline in consumption. Behind these stories is a picture of an economy in deep distress, scarred by job losses, salary cuts and lost livelihoods.
The Rs 8.8 lakh crore real estate sector, which constitutes 4.33 per cent of the GDP, and was battling high inventory and low demand well before Covid-19, has seen a 49 per cent dip in sales in the first half of this year over the preceding six months in the country’s top seven cities. This has placed the sector under severe stress. The Rs 8.7 lakh crore automobile sector witnessed a never-before-seen event this April: a month of zero sales. Industry associations predict a de-growth of 25-40 per cent. However, there is hope that pent-up demand and the preference for private over public transport will see a quick revival in a sector that employs 19.1 million people and contributes 4.28 per cent to the GDP.
In this prevailing scenario of gloom, a few bright spots have appeared. These are sectors that have thrived during the lockdown and the social distancing rules of the pandemic. E-learning, for instance, blossomed because educational institutions were shut. The pandemic has transformed India into the second-largest market for e-learning after the U.S. The sector is expected to cross Rs 14,479 crore in revenue by 2021, with around 9.5 million users. E-commerce boomed because people were afraid to go out and shop. It is now poised to grow more than three times to reach Rs 7.4 lakh crore in the next four years. The healthcare market is predicted to increase three-fold to Rs 8.6 lakh crore by 2022.
But these rays of hope are few and far between. A pall of uncertainty hangs over the economy as it sporadically limps back to normalcy. In a reflection of how much opinions vary, economists and businessmen are predicting a whole alphabet soup of recovery models: V for a sharp recovery, L denoting prolonged stagnation, U signifying gradual recovery, W indicating a roller coaster recovery and K a recovery in which some sectors will rise while others will fall. Let me add one of my own: Z. My prediction is that the economy will zig-zag as corona infections rise and partial lockdowns are enforced until the spread of the virus is controlled. The fact that government policies seem to be formulated in a piecemeal fashion means there will be no consistency in the growth pattern. Eventually, it will rise rapidly.
What we need is a V-shaped recovery. The severe damage corona has inflicted on the economy means that we have a tremendous amount of catching up to do. What shape the recovery will take will depend a lot on government policies, the pace and nature of reform and the level of government intervention.
(India Today Editor-in-Chief’s note for the cover story, Hope and Despair, for October 5, 2020 issue of India Today magazine)
Also read: How to cure an economy that is sick