The ongoing Covid-19 pandemic has impacted economies around the world like no other event that experts can recollect since the Great Depression.
Some of the strongest economies around the globe are struggling to cope with the situation in the wake of an unprecedented demand shock and a shutdown of all key economic activities that drive growth.
In the world’s most powerful economy, the United States, a massive number of jobs losses have been reported due to the Covid-19 pandemic. The situation is so bad that US President Donald Trump recently said the “US has been attacked and Covid-19 is not just any flu”.
India, too, has been hit hard. Global rating agency has slashed India’s GDP projection for FY21 to 0.8 per cent. The Covid-19 pandemic has been a huge blow to India, especially since many sectors were already facing a crisis when the Coronavirus storm hit.
The virus not only accelerated the crisis but also ended the good run that some sectors were enjoying. Adding to the worries in a steep demand shock that experts say is classified as a long-term worry, citing uncertainty in the post-pandemic landscape.
If not all, key sectors that make up a larger portion of India’s GDP have been taken completely or partially out of action. Reports of job losses, unpaid leaves and other concerns are being reported almost on a daily basis from such sectors.
CMIE data shows how unemployment in India spiked in the month of April 2020. The situation is expected to worsen if the situation shows no improvement over the next few months.
Many sectors have appealed the government to ease some restrictions so that they can at least resume business or grant some relief so that they can at least pay wages to their employees.
Enumerated below are 5 sectors in need of urgent help and cooperation from other sectors better position amid the crisis:
The Micro, Small & Medium Enterprises (MSMEs) are literally the backbone of all Indian sectors and often engaged in manufacturing and export activities — the two key drivers of the Indian economy.
Today, almost all MSMEs are out of action due to the lockdown, chocking all production activities at major firms across sectors. There are a lot of reports that indicate how MSMEs are reeling under crisis and have no money to pay their employees.
From leaders to experts and industry bodies, everyone has appealed to the government to increase its relief package for the MSME sector, which contributes to over 30 % of India’s GDP.
It may be mentioned here that a majority of the small units may have to shut shop if they do not get a relief package soon. Thus, the government is planning to release Rs 20,000 crore relief package, divided into two funds, for helping MSMEs.
Tourism & Hospitality Sector
As the pandemic unfolded, the tourism sector was the first to get disrupted by the impact of Covid-19 and perhaps it will be the last to see a resumption of activities.
Several reports also indicate that the tourism sector will be worst affected due to the virus pandemic.
The government also knows how bad the sector has been hit and acknowledged the same through a recent press release. Last month, a KMPG report had already predicted the Indian tourism and hospitality sector to lose more than over 3.8 crore jobs.
That figure is bound to increase after the lockdown was extended to 3rd May 2020.
An article on the Economic Times said India’s aviation sector may lose as much as Rs 5 lakh crore along with 4-5 crore job losses.
As the outlook of the industry is expected to stay under pressure for at least next few months owing to increased uncertainty, there are many calls for a minimum wage package for affected workers who have been rendered jobless because of the lockdown.
The crucial aviation sector that connects nations across the world is witnessing a spurt of layoffs and pay cuts. Some workers have been asked to go on forced unpaid leaves by aviation companies, who have been hit equally hard as the tourism and hospitality sector.
Each day, there are reports of global airlines announcing furloughs or layoffs as operational strains deepen in the wake of the lockdown.
CAPA India, a leading travel and tourism consultancy firm, said in a report last month that global aviation activity has sunk over 66 % in the wake of the Covid-19 crisis.
“In India, the decline in aircraft movements has been even more dramatic. With the exception of a handful of cargo and repatriation charter flights, India’s skies are largely empty,” the April 2020 report said.
Since the report was prepared before the lockdown 2.0 was announces, the effects on the sector may have amplified.
It fears that the situation in the post-virus setup would remain almost the same for the aviation sector.
The report further states, “From a point of complete suspension of travel, recovery is likely to be slow. Demand will be suppressed due to economic dislocation; slow or even negative GDP growth; broken supply chains; low consumer confidence; and concerns about lingering outbreaks of COVID-19, especially if travel insurance companies refuse to provide cover for associated medical expenses or travel disruption costs.”
Therefore, the sector, like the travel and tourism segment, is also in urgent need of financial help to support employees.
The automobile sector in India has been forced to stop key manufacturing activity and this has led to a sharp drop in production and sales.
With most of the plants shut, big automobile manufacturing companies have announced pay cuts and are waiting for a decision on resumption of dealerships.
However, RC Bhargava, an industry veteran and Maruti Suzuki Chairman, told the media how the automobile sector is interlinked with many other small sectors that manufacture key parts, which are then used for manufacturing vehicle components.
For that reason, Bhargava like many others from the industry is urging the government to at least open a few dealerships to resume businesses.
He also said that a package for the industry, especially for the ones at the bottom of the manufacturing chain, is quite necessary.
Real Estate Sector
Finally, the real estate sector outlook has also suffered immensely due to the lockdown, which was announced to prevent the spread of the deadly Covid-19 virus.
One real estate group, namely ANAROCK Group, in a report last month said that housing sales will fall 25-35 % while office absorption will fall in the range of 13-30 % on a year-on-year basis.
In the long run, this kind of reduction in commercial and residential property could reset the future of real estate in India, the report added.
In addition, while construction activities have resumed in some areas, there are many hotspots areas in urban areas where key construction projects have been put on hold for several weeks due to the lockdown.
This has brought on unemployment among millions of migrant labourers in India, who are engaged primarily in construction activities. Indeed, hardly anyone of these labourers, who live on daily wage, have additional savings to see off the lockdown period.
The government has urged employers to not cut wages or lay off such labourers; however, reports suggest that companies are left with no choice but to let their workers go due to cash flow issues.
The government has announced several relief measures for them, but it is hard to ensure whether the benefits are reaching all.
In such a scenario, the government could announce a job security scheme that covers certain employees, similar to what some countries including the UK have done.
While these are the five sectors that need urgent help, the outlook of other sectors in India are also deteriorating. A larger job security scheme for those who have been laid off could be the only way to protect the affected citizens.