Post-Lockdown Strategy for Economic Revival
Post lockdown there can be expected de urbanisation, thus further focus on the development of rural cities can potentially reduce the unemployment rates, predicts Mr. S RAVI, FCA, Managing Partner Ravi Rajan and Co Chartered Accountants Independent Director in various Companies and Former Chairman BSE.
An exclusive article S RAVI, FCA, Managing Partner Ravi Rajan and Co Chartered Accountants Independent Director in various Companies, Former Chairman BSE
Post-COVID 19 economies would usher in a paradigm shift with new protocols and policies. Current businesses will review, revisit and reset the ways of transaction and trade. IMF has estimated a V shape recovery for India in 2021-22 with GDP of 7.4%. COVID 19 has created economic havoc and disrupted the economic ecosystem much worse than a Wartime or a financial crisis could do.
Industry professionals should deliberate on taking steps to secure, sustain and ensure growth. Ensuring financial liquidity, working capital, retaining jobs and honour financial commitments. Additionally, utilising digital platforms for connecting, innovation and adaptation to the new business mechanisms. The industry will face viability in operations as a result of the slow pace of growth, hence the industries should be able to transform itself.
The Government has given multiple stimulus packages addressing both fiscal and monetary. Further support may be initiated by reducing tax burdens, lowering GST rate, deferring GST, tax holidays and SOPS in most affected sectors, creation of funds can be considered for immediate credit in certain industries.
Due to restrictions placed, the primary impact on a global scale pertains to trade between countries, thus there should be a close monitoring of imports, exports and forex reserves.
Following is the Stimulus packages compared to GDP% and Fiscal balance % to GDP-
COVID 19 Stimulus packages
Stimulus % to GDP
|Fiscal Balance % to GDP –|
GBP 65.5 billion
RMB 2.6 trillion
The Government should consider to support domestic manufacturers of the companies by providing capital to expand operations and cover for the supply gap from overseas.
India’s top imports
There was a drop of nearly 16% in total imports during the first three weeks of March which was mainly driven by decreased imports of precious & semi-precious stones, gold and sharp drop in crude oil prices. The five key import items that are heavily dependent on China are- electrical machinery, machinery, and mechanical appliances, plastics, organic chemicals, optical and surgical instruments, all these alone account for 18 per cent of India’s total imports. Also, India’s biggest import source country for iron and steel. Currently, India imports almost 70% of its bulk drugs and intermediates – the chemicals that make finished drug work from China, many of which are sourced from Hubei province -the origin of the pathogen. Of the total $3.56 billion imports of such products in 2018-19, China’s share was $2.4 billion, according to information presented in the Indian parliament.
The Government should consider to support domestic manufacturers of the companies by providing capital to expand operations and cover for the supply gap from overseas. Hereby providing skill set for speeding up the scale of domestic companies supplies. This measure will reduce the trade deficit and conserve our forex reserves.
India’s major pharmaceuticals companies such as Abbot Industries, Zydus Cadila and Wallace have been given orders by the Government to produce hydroxychloroquine sulphate in bulk quantities to meet domestic demand and potentially the increased overseas from other countries as well.
|Top Exports of India|
Muted exports could also have major effect on-off India’s trade bill. India’s exports rose for the first time in seven months in February, up by 2.9 per cent and driven by growth in shipments of sectors such as petroleum, engineering and chemicals. However, India’s exports to China only account for 5 per cent of India’s total exports. Although, certain commodities like organic chemicals and cotton could be severely affected. The country also lifted the ban on the export of hydroxychloroquine sulphate, the drug that is being touted around the world by leaders as an untested cure for the virus. It has received orders from around 30 countries for this drug.
After the rapid spread of the virus, India banned exports of sanitisers and ventilators including all artificial respiratory devices anticipating a spike in local demand. It had initially also put in place a ban on the export of hydroxychloroquine sulphate to meet its own domestic demand as a priority. India, being the among the largest manufacturer of vaccines and generic drugs in the world, could see its pharma production ramped up further, looking at how quickly the novel coronavirus is spreading.
The government continues to explore the option of asking automakers to manufacture medical equipment’s in its manufacturing units, which have been lying idle since the lockdown was announced. India’s largest automakers including Mahindra, Tata Motors, Hyundai and Maruti Suzuki have held discussions with the Government about manufacturing ventilators and other respiratory equipment on a large scale. They are in the process of tying up with ventilators manufacturers to gain some expertise into this field. India’s major pharmaceuticals companies such as Abbot Industries, Zydus Cadila and Wallace have been given orders by the Government to produce hydroxychloroquine sulphate in bulk quantities to meet domestic demand and potentially the increased overseas from other countries as well.
The government is looking at a graded response to lifting the curbs on the lockdown, subject to the Covid-19 cases in the district and the state. Around 100 districts had been severely hit by the coronavirus disease and hence there was a need to seal these hotspots. In districts that have isolated instances of COVID cases, many of the restrictions could be lifted to allow some economic activity to resume. Even in these states, the strategy of the Government will be to have containment zones with no movement while allowing economic activity to pick up outside these hotspots with social distancing and masks. The government allowed certain exceptions during lockdown to ensure that the farmers do not face the fallout of complete standstill. The government realises the need to ensure that local produce reaches the doorstep of the final consumer.
‘Post lockdown there can be expected de urbanisation, thus further focus on the development of rural cities can potentially reduce the unemployment rates.’
The government may provide further incentives for companies to work from home, video call meetings and filings on electronic platforms. Thereby coping with the upcoming trends, lifestyles and work culture would undergo a major change in establishing new norms. A possible tax reduction for companies having work from home policies shall be considered to promote them to adapt to these practices.
Maintaining a supply chain of essential commodities and livelihoods of those below the poverty line should be addressed on a priority basis and efforts to integrate them into the organised sector should be made. Consumers are cautious about visiting public places, spending on luxury goods and entertainment. Lockdown has bolted the network and supply chain arresting trade and transaction activities. Industry and service sector face a clampdown. New demand would remain subdued, howsoever agriculture, farming and allied activities have been ensured uninterrupted harvesting of crops. Difficulty in movements of goods and people within the country may dent the profits in time to come.
Going forward risk management practices will include not only mitigation from a financial perspective but will also involve strategies to cope with such epidemics. When the storm of COVID 19 settles down, the new world order will bring about radical business practices and processes which will make the organisation agile and dynamic.