COVID-19: A shock for Indian Industries

The COVID-19 will be proving as an extreme demand shock for the Indian economy and will be acting as big hindrance in the country’s GDP growth amidst lockdown due corona virus. The negative impact will be observed across almost all sectors, according to a report. According to Dun & Bradstreet, in Economic Times Report, apart from the negative impact of COVID-19 on human lives and global supply chain network, it will also act as a giant oceanic wave of severe demand shock which may damage the route of recovery of Indian Economy. However, the depth of actual impact would depend on the spread and duration of the outbreak, which is still unimaginative. The relative impacts on various sectors have been estimated with the consequences. These consequences may further lead to disruptions on other sectors too since all sectors run in a harmonic environment where there exists an interdependency on each other. Following are some major Indian sectors, with the estimates of vital dimensions of international business operations.

Raw materials and spare parts

Nearly 55% of electronics in India are being imported from china. These imports have already dropped to 40% amidst the coronavirus outbreak and subsequent lockdown. Promotion of Indian items are being done as a measure to counter the dependency on Chinese imports. Organic chemicals, mineral fuels, cotton are exported to India which is the third largest export partner of China. A lockdown of the countries is likely to lead to a substantial trade deficit for India as well.

Pharmaceuticals

More than 70% of active pharmaceutical ingredients (API) are imported from China. These ingredients are required in large volumes by pharmaceutical companies in India. As the pandemic is rapidly spreading throughout India, medication will be going to top the list of consumer demands, and amidst the shortage of API, the pharmacy industry will face the problem of over pricing. The prices of vitamins and penicillin alone already see a 50% surge.

Tourism

India is one of the favorite destinations and a hot spot for tourists throughout the world. A large number of confirmed COVID-19 cases in India include foreign tourists as well. The whole tourism value chain comprising of hotels, restaurants, attractions, agents, and operators are running in losses of worth thousands of millions of INR after the decision of Government of India to suspend foreign visas and cancellation of International flights till mid April 2020.

Aviation

Nearly 600 international flights to and from India and around 90 domestic flights have been canceled, leading to a sharp drop in airline fares, even on popular local routes. Private airport operators now want Indian Government to grant permission to impose a nominal passenger facilitation charge on airfares to compensate the loss.

Real Estate

The sales could fall by up to 35 per cent across major Indian cities during the 2020 following the outbreak of COVID-19 in the country. While net office space leasing could fall by up to 30 per cent to 28 million sq ft in 2020 from 40 million sq ft in 2019. In a base case, the property consultants and experts are of the opinion that sales could drop 25 per cent to 1.96 lakh units this year from 2.61 lakh units in 2019 across seven major cities. New construction of homes is likely to forecast an annual decrease of 25-30 per cent in 2020 from nearly 2.37 lakh units in 2019. Thus, aforementioned drastic and severe consequences shall be observed in these major Indian sectors, which will take time to recover from this slowdown of Indian Economy and resume to normal functioning as ever before.

*A lakh is a unit in the Indian numbering system equal to one hundred thousand ( 100,000 ).