The hard road ahead: Stories of sectors facing their own unique challenges amid Covid pandemic

By: |
April 26, 2020 1:01 AM

While millions face the disease, almost all are facing economic hurdles. No sector is untouched, and no impact is small. Looking beyond oil and aviation, we bring you stories of sectors facing their own unique challenges.

A majority of small- and large-scale businesses already fear the economic impact, leading to a reduction in revenues, loss of trade, investment and supply chains. A majority of small- and large-scale businesses already fear the economic impact, leading to a reduction in revenues, loss of trade, investment and supply chains.

Confined to a one-room house in a nondescript neighbourhood of north-east Delhi, Rajendra Kumar is uncertain about his future and his two schoolgoing kids. For him, the extension of the lockdown means a protracted financial crisis, which may take five to six months to resolve. Kumar, a tailor by profession, is the sole breadwinner of the family, who operates from Lajpat Nagar in south Delhi, and earns Rs 20,000 per month. With no work at hand, he is now coping with uncertainties. “I have no income to run my house. Since my expertise is tailoring, I will wait for the markets to open to earn a living,” says the 45-year-old, who left his village near Gwalior years back to settle in the city for good.

The impact of the pandemic wiping out commercial and economic activities has not only left Kumar in dire straits financially, but many individuals and business owners in panic. A majority of small- and large-scale businesses already fear the economic impact, leading to a reduction in revenues, loss of trade, investment and supply chains. When the world emerges from the pandemic, sooner or later, some businesses are probably going to be the hardest hit or would have vanished. The disruption would impact the consumption of both essential and discretionary items, leading to low income, limited workforce and jobs at risk. We look at some sectors which are already feeling the heat…

Tea losing aroma
Estate owners fear huge losses after the crisis is over—short supply, price rise and sharp decline in Indian exports

Tea gardens in India have been closed since December, losing out around 120 million kg of tea. December being a lean season for cultivation, the bushes are pruned and readied for harvest in March-April. Now, with a complete lockdown, estate owners fear losses after the crisis is over—short supply, price rise and sharp decline in exports, expecting buyers to control overspending and subsidised rates in the future.

“The pandemic will cause a deep financial crisis to a sector already hard-hit,” says Jayaraman Thangavelu, managing director, Havukal and Warwick, a tea estate in Tamil Nadu, “We anticipate over 20 million kg shortfall in the crop in south India as operations are not full-fledged and supply chain activities need to be restored.” Tea has been selling at an average of Rs 150 a kg and prices have remained stagnant for past five years.

Dry winter and limited stock could affect the yield in north India. An industry insider, on the condition of anonymity, anticipates that tea exports next year may not be robust, saying, “We will face difficulty in selling the first flush, as contracts might get cancelled and export buyers will look at replacement due to shortage of good quality. The first flush produces the best-quality tea and is exported to major countries, fetching a higher price. If it is wiped out, the second flush in May could salvage things to an extent.”

For Gaurav Jalan, director of Doomni Tea Estate in Assam, the closure will amount to irretrievable losses. “This year, winter was dry, which is not good for bush health… the loss of first flush will see a shortage of about 70 million kg of premium quality. Transportation chain is not regularised, and there is no tea in stock,” he says. Darjeeling makes about 8.5 million kg tea a year. Of this, 25% of volume comes from the first flush with 40% value. North India lost 3% crop in March and 2% more in April.

Game suspended
The pandemic will result in a serious economic ripple effect for sportspersons, as well as sponsored events

Two-time Olympic champion Sushil Kumar is disappointed to hear about the rescheduling of the Tokyo Olympics to 2021. But he plans to continue spending extended hours in training, as he has ample time to prepare for the game now. “It’s discouraging for players who spend months on a rigorous training routine, practise hard with ropes and do sit-ups to stay fit to qualify for the games,” says the freestyle Indian wrestler. The Olympics are arguably the biggest sporting event and, for many professional athletes, a lifelong dream. But the delay, if rightly estimated, has not only impacted the careers and lives of the players, but brought an overall financial loss of about 700 billion yen (approximately $6.32 billion) to Japan.

The over Rs 2,000-crore sport goods manufacturing of cricket, hockey, football, rugby and fitness range has stopped in Jalandhar, a manufacturing hub of sports goods. From the most globalised tournament, the Premier League, to the most promising World Championships and continental tournaments—National Basketball Association, The National Hockey League, and major football competitions, including the UEFA Champions League, Formula 1, European Football leagues, or Wimbledon—postponed, the future of sports at the moment looks grim. A serious economic ripple effect for players, full-time sponsored events and seasons postponed and huge losses, throw some light on the industry’s darkest hour.

“If the tournaments are postponed for an indefinite time period, then it’s a complete loss of game. Thousands of players earn their bread and butter from academy training and tournaments. We can’t have a sport in an empty stadium—but as a federation, we understand and prioritise the importance of human health and life. We believe in development through healthy competition,” says Subrata Dutta, senior vice-president, All India Football Federation (AIFF). The federation has suspended tournaments at all levels, including the flagship I-League, which delivers a massive financial hit of Rs 600 crore a year.

For BCCI and IPL, top overseas players are at risk of losing contracts worth millions of dollars in the event of a cancellation. Manmeet Singh Goindi, former director, Sports Authority of India (east region), says the next six months are crucial. “Players prepared for training and competition will go back to where they started. The idea of sport, including contact and community sports like judo, wrestling and marathons, would change, as all these require social distancing. Various levels of decision-making—international, country and national governing body—for each sport are required,” he says.

Adding to the economic woes of sporting events worldwide, Jaideep Ghosh, partner and national head, transport, leisure and sports, KPMG India, feels, “Large events involve big money in media rights, sponsorships, ticketing, among others. A significant dent in employment and consumer spending is likely. Grassroots and youth sports development also suffers in the short term. Social and cultural motivations, team pride also take a dip.”

 

Jobs jeopardised
Fresh graduates have no job offers; only those with updated skills have good chances of employment.

As per reports, jobs offered to six students of IIT-Madras have been revoked by companies due to the pandemic. This is just the tip of the iceberg. Fresh graduates and professionals are looking at a minimum of a year’s unemployment and uncertainty, and like the IITians, even loss of offers.

The Confederation of Indian Industry (CII) recently conducted an online ‘CEOs Snap Poll’, with 200 CEOs across sectors to study the impact on domestic economy and jobs. A majority of the firms expected revenues to fall more than 10% and profits to decline more than 5% in April-June and January-March. About 52% of the firms foresee job losses, as a result of the outbreak. About 47% of the firms expect less than 15% job losses. On the other hand, 32% of the firms expect to shed about 15-30% jobs once the lockdown ends. Industry trade organisation Federation of Indian Export Organisations has warned of 15 million job losses in the absence of a relief package for the export sector.

Deepak Sood, secretary-general of Assocham, recommends a transfusion of over $200 billion into the Indian economy, with $50-100 billion cash infused to arrest the loss of jobs and compensate for loss of income.

With job cuts on the rise, KPMG estimates the government spend on skill development for the year 2020-21 to be R30 billion. So if hiring is put off for the period, and when the process resumes, only candidates with updated and attractive skillsets shall be employed.

Placements and internships have impacted companies, which are delaying the onboarding of students. Industry expert Kalpen Shukla, president of IIM Alumni Association (Mumbai Chapter), says, “We may face a difficult situation, especially in the case of summer internships, primarily due to location-specific disruptions. Those with degrees, but not in possession of the right skills, would find themselves unemployable in a fiercely resource-constrained economy. The much cherished ‘democratic dividend’ could become ‘democratic disaster’.”

Anurag Singh Rathore, dean for corporate relations, IIT-Delhi, agrees: “The manufacturing sector is impacted; the disruption can last months. A student may reutilise this time to learn a new skill online or offline.”

Arjya B Majumdar, dean, admissions and outreach, OP Jindal Global University, has realigned the placement strategy to reach out to corporates unlikely to be affected by the pandemic. “We have seen an uptick in the number of e-commerce firms,” he says.

Rishiraj Biswas, a graduate from Faculty of Management Studies, Delhi, has been upskilling through an online finance course after passing out this year. “The job scenario has been blurry for fresh graduates and it may worsen later. I want to keep pace with the industry’s demands,” he says.

 

Unorganised chaos
India currently has over 75 million micro, small and medium enterprises, and close to a quarter of these firms will face closure, hitting the unorganised sector hard

A sense of fear prevails in the unorganised sector, which includes street vendors, electricians, homepreneurs, artists and the self-employed. Like Delhi-based electrician Ram Singh from Nepal, who is struggling for cash in absence of work. “I foresee a bleak future,” he says.

Manish Gouhari, the Delhi-based proprietor of The Family Cottage, a women’s ethnic-wear outlet in Rajouri Garden, Delhi, feels that fund flow will be hit. “The consumer may not step out of the house for a non-essential item as ours. But I will have to pay my workers and buy my essential items. Where will this money come from?” he asks.

India currently has over 75 million MSMEs (micro, small and medium enterprises) and close to a quarter of these firms will face closure if the lockdown goes beyond four weeks, while a staggering 43% will shut shop if the panic extends beyond eight weeks, as per a study commissioned by the All India Manufacturers’ Organisation.

According to the International Labour Organization, about 400 million Indians in the informal economy are at risk of falling deeper into poverty because of the lockdown. The crisis is expected to wipe out 6.7% of working hours globally in Q2—equivalent to 195 million full-time workers (assuming a 48-hour work week). This implies that many workers will face loss of income and deeper poverty.

For Delhi-based accessory designer Ambar Pariddi Sahai, it is a ‘thrive-to-survive’ situation. “I was running a business in my comfort zone, but now it will not be easy, as I have to minimise my cost of functioning, reduce overheads, manpower and wages.” She hopes for some government stimulus. Delhi-based Utkarsh Arora, director, Xylo Woodworks, a supplier of decor elements, finds the sector becoming more unstable. For small-scale businesses with limited capital and market reach, like Reshmi Dey’s, who runs an art studio called Glass Sutra, sustaining business would be a challenge.

Overall, the unorganised sector is labour-intensive with income inequality and no job security, which means it is bound to go through insufficient economic activity. The sector needs steps to widen social security of workers, with formal benefits and policies.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1No second coronavirus wave in Mumbai, assures municipal commissioner
2Covid-19 vaccine update: Chinese company SinoVac says coronavirus vaccine to be ready by early 2021 for distribution worldwide
3Delhi Deputy CM Manish Sisodia diagnosed with dengue