Coronavirus outbreak cripples all major sectors in country; sharp fall in revenues, unemployment to rise in coming days

The coronavirus or COVID-19 outbreak has led to a paralysis of industries in India and across the globe.  There are fears of an imminent global economic recession is also looming.

The outbreak has started crippling various sectors in the country too. The domestic economy, which has been facing slump over the past few quarters, has suffered yet another blow in the wake of the COVID-19 outbreak.

Here is a reality check on various domestic sectors that has been hit by the deadly virus.

Retail sector's loss to jump 50%

With more stringent measures expected in the coming days in the wake of mounting COVID-19 fatalities across the world, the retail sector is expected to bear the brunt of the government action that may come in the form of partial or total shutdown.

Many state governments have ordered full or partial shutdown of shopping malls in cities. Retail operators have been pushed into a major crisis with annual losses expected to jump over 50 percent, according to a report in Moneycontrol citing view of the experts.

Footfalls have declined and reduced to almost nil as most malls across the country are shut and sales too are down by 70 percent as the disease is spreading to more areas, the report said.

So far, 5 persons have succumbed to coronavirus and as many as 195 tested positive in the country.

 Coronavirus outbreak cripples all major sectors in country; sharp fall in revenues, unemployment to rise in coming days

File image of Rs 100 notes. AFP.

With the call for social distancing and self-isolation increasing in an attempt to prevent the spread of COVID-19, in most cities, consumers stay away from crowded places while retailers are ensuring regular sanitisation. The staff strength has been reduced and people are encouraged to shop online, said a report in Mint.

Walmart India, which runs 28 wholesale cash and carry stores, urged small businesses and retailers that shop from its stores to take advantage of its omni-channel presence by shopping online at the Best Price website (www.bestprice.in) and get orders home-delivered, the report said.

“This will decrease chances of physical contact and help reduce the spread of the virus," the report said, quoting a Walmart India spokesperson.

Real estate recovery delayed

The coronavirus outbreak inflicted more damage on the already ailing realty sector in the country.

The real estate industry witnessed some traction over the past few quarters but the trend may change due to the pandemic and its subsequent adverse impact on the economy besides liquidity pressure, said a report in Financial Express.

Several players in the real estate industry are not willing to launch new projects due to the ongoing situation and fresh launches are expected to witness 15-20 percent decline in the forthcoming festive season. The developers are more interested to complete their projects, the report said.

The real estate industry leaders hope that the crisis-hit sector will see improvement in sentiment over the next 12 months, said a report in Mint.

The sector has been under slowdown for the past nearly five years due to dip in demand and the situation worsened due to crisis in the non-banking finance companies (NBFCs), which were active lenders to the sector, the report said.

Auto industry suffers a setback, production to fall in 2020

The coronavirus outbreak was a major setback for hopes of a revival in the beleaguered auto sector of the country, which had grappled in the red due to a sharp fall in demand for over two quarters.

India depends on China for most of its auto spare parts and China's suspension of shipments through sea after the outbreak may adversely impact the domestic automotive component industry, said a report in Business Today.

China accounts for 27 percent of India's automotive component imports every year, the report said.

"The coronavirus is expected to have an impact on the Indian automotive industry and hence also on the automobile component and forging industries, who had already reduced their production rate due to the market conditions and on account of the impending change over to BS-VI emission norms from BS-IV from 1 April 2020," the report said quoting S Muralishankar, President- Association of Indian Forging Industry.

In February this year, Fitch Solutions had said it expected vehicle production in India to contract by 8.3 percent in 2020 as the auto industry faces increasing risk of supply shortage due to China's coronavirus outbreak, possibly hitting domestic output if the virus spreads in the country.

In China, where the virus originated, automotive manufacturers have halted production in order to limit the congregation of people and reduce the exposure of its population to possible infection.

"China supplies India with between 10-30 percent of its automotive components, and this could be two to three times higher when looking at India's EV segment, which highlights just how exposed India's automotive manufacturing industry is to the slowdown of vehicle Chinese component manufacturing," it said.

Aviation sector

All airlines in the country will report significant losses in the first quarter of this year and may initially ground around 150 planes as the shock from the coronavirus pandemic will be "far deeper and much longer", according to a report.

Aviation advisory firm CAPA India said on Wednesday even before COVID-19 (coronavirus) appeared on the scene, most Indian carriers already had very strained balance sheets and almost no liquidity.

"This latest shock will once again expose the vulnerability of India's aviation system as happened during the fuel price spike in 2008. But on that occasion the shock was short-lived, even if its impact reverberated for several years. This time, the shock itself will be far deeper and much longer," it said in a report, according to PTI.

The aviation sector has been hard-hit with economic recession and the coronavirus pandemic has dealt it a hard  blow. A few chief executives and managing directors of airlines have announced they are taking a pay cut before imposing one on employees. Senior management of budget carrier IndiGo will bear a pay cut in their salary with CEO Ronojoy Dutta also taking 25 percent lesser salary starting next month. The airline will pay less salaries to its senior employees as revenues start drying up, it said.

In the wake of significant reduction in services, the report said Indian carriers might initially ground around 150 aircraft, and the number is expected to increase as more domestic operations are curtailed over the coming weeks.

"If the decline in traffic continues to be severe, the majority of the fleet could be grounded by April," it noted.

As per CAPA India, all Indian airlines will report significant losses in the first quarter even with oil prices at around USD 30 per barrel.

"At an industry level, consolidated losses are estimated to be in the range of USD 500-600 mn for the quarter (excluding Air India). However, these are very preliminary estimates and are subject to further downward revision.

"In the absence of serious and meaningful government intervention, such an outcome could lead to several Indian airlines shutting down operations by May or June due to a lack of cash," it said.

Further, the report flagged the possibility of retrenchments in the domestic airlines industry.

The aviation and tourism industry is seeking help from the government to mitigate the financial impact of the coronavirus epidemic. The Association of Private Airport Operators (APAO) has written to the civil aviation ministry seeking an alleviation package to deal with the higher expenses incurred to prevent the spread of the disease such as screening of passengers and disinfection, said a Mint report.

Among other things, APAO has asked for levying a “nominal passenger facilitation charge" on airline tickets to cover the extra cost. “The trade impact of the coronavirus epidemic for India is estimated to be about $348 million and the country figures among the top five economies most affected as slowdown of manufacturing in China disrupts world trade, according to a UN report," the APAO said in a letter to the ministry of civil aviation, the report said.

Trade impact of virus outbreak in India

Early this month, United Nations Conference on Trade and Development (UNCTAD) had said that the trade impact of the coronavirus epidemic for India is estimated to be about $348 million and the country figures among the top 15 economies most affected as slowdown of manufacturing in China disrupts world trade. The slowdown of manufacturing in China due to the coronavirus outbreak is disrupting world trade and could result in a $50 billion decrease in exports across global value chains.

The coronavirus outbreak could cost the global economy up to $2 trillion this year, the UN's trade and development agency said, warning that shock from the epidemic will cause a recession in some countries and depress global annual growth to below 2.5 percent.

On Thursday, a Chinese state-run media said that Indian economy is "remarkably unscathed", while major economies across the globe is grappling with "severe fallout" due to the surge of coronavirus cases, reported PTI.

"The world's second-most populous country with 1.3 billion people had reported just over 130 coronavirus cases and three deaths by Tuesday, in stark contrast to exploding numbers of cases around the world and despite its close proximity to massive virus clusters in Asia and a relatively unsophisticated public healthcare system," an article in the Global Times stated.

"As major economies around the world grapple with severe fallout from the global coronavirus pandemic which continues to show no sign of abating, one emerging economy has remained remarkably unscathed: India," it said.

The article underlined that India's case is "encouraging" at a time when thousands of people have died as a result of the virus and hundreds of thousands of lives are potentially at risk.

Travel restrictions cripple tourism industry  

The coronavirus impact could render 3.8 crore people jobless, which is around 70 percent of the total workforce in the tourism and hospitality sector, according to a grouping.

The Federation of Associations in Indian Tourism & Hospitality (FAITH) also said there should be a support fund for twelve months to support basic salaries with "direct transfer" to the affected tourism employees.

"As a result of this pandemic, the Indian tourism industry is looking at pan India bankruptcies, closure of businesses and mass unemployment," FAITH said in a letter to Prime Minister Narendra Modi.

The aviation sector has been hard-hit with economic recession and the coronavirus pandemic has dealt it a hard blow. A few chief executives and managing directors of airlines have announced they are taking a pay cut before imposing one on employees. Senior management of budget carrier IndiGo will bear a pay cut in their salary with CEO Ronojoy Dutta also taking 25 percent lesser salary starting next month. The airline will pay less salaries to its senior employees as revenues start drying up, it said.

AirAsia India’s fleet expansion plans would be stalled, the CEO told staff at its Bengaluru headquarters, said a report in the Economic Times. Rival low fare carrier SpiceJet temporarily suspended almost its entire international operations, following GoAir and Vistara the report said.

Rival low fare carrier SpiceJet temporarily suspended almost its entire international operations, following GoAir and Vistara.

In the wake of significant reduction in services, the report said Indian carriers might initially ground around 150 aircraft, and the number is expected to increase as more domestic operations are curtailed over the coming weeks.

"If the decline in traffic continues to be severe, the majority of the fleet could be grounded by April," it noted.

According to industry chamber CII, this is one of the worst crises ever to hit the Indian tourism industry impacting all its geographical segments - inbound, outbound and domestic, almost all tourism verticals - leisure, adventure, heritage, MICE, cruise, corporate and niche segments, reported PTI.

The whole tourism value chain across hotels, travel agents, tour operations, destinations, restaurants, family entertainment venues and air, land and sea transportation have been hit.

Mariott IntenationalPresident and CEO Arne Sorenson tweeted about the gravity of the pandemic and its repercussions on the sector.

In an impact assessment of the coronavirus pandemic, CII Tourism Committee said inbound foreign tourism of over $28 billion in value terms accounts for an average 60-65 percent between October to March.

"As the news of the virus started picking up from November, the percentage of cancellations started going up in this segment exponentially and is reaching a peak of almost 80 percent now in March in many Indian locations. The value at risk from this segment will be in multiples of tens of thousands of crores," the CII assessment report said.

On 11 March, India barred entry of the nationals of three more countries, France, Germany and Spain, suspending the regular as well as e-Visas granted to them till date, if they have not yet entered the country.

"All regular (sticker) Visas/e-Visas granted to nationals of France, Germany and Spain and issued on or before March 11 and who have not yet entered India stand suspended with immediate effect," said a Bureau of Immigration notification issued late Tuesday night.

Regular visas, including e visas, granted to all foreign nationals who have travel history to these countries on or after 1 February and who have not yet entered India also stands suspended, it said.

Hotel industry's loss pegged over Rs 620 cr

The hotel industry fears that travel restrictions in the wake of the coronavirus outbreak will impact their growth and revenues as the pandemic continues to spread across the world.

The coronavirus pandemic is expected inflict losses on the domestic hotel industry up to Rs 620 crore, said a report in The Hindu Business Line.

The hotel chain and standalone hotel segment is staring at losses over Rs 130-155 crore, whereas the alternate accommodation segment is likely to make losses of over Rs 420-470 crore, said a report citing a research report.

Hotel chains and hospitality sector are witnessing a dip in occupancy rates and subsequent fall in revenue this month after the government tightened travel restrictions to prevent further spread of the disease, said a report in The Economic Times.

Both business and leisure trip cancellations by inbound travellers and future bookings are getting stalled, the report said.

On 18 March, the National Restaurant Association of India (NRAI) asked all members to shut down their restaurants till 31 March or till such time when no new cases are reported in view of rising health risks following the spread of coronavirus.

“In view of the serious health risk to employees and patrons in the foodservice sector amidst ever-worsening situation around COVID-19 in India, we as a responsible industry body, have sent out an advisory to all our members to shut down their restaurant operations from 18 March till 31 March or till such time when there are no new cases reported for a few days,” NRAI said in its advisory.

IT industry damage minimum now

On 13 March, state-owned Software Technology Parks of India (STPI) had issued an advisory that enabled around 18-20 lakh employees of IT units registered with it to work from home.The advisory was part of a precautionary move to check spread of deadly coronavirus among the workforce in the industry.

IT industry body NASSCOM had urged the government to relax restrictions regarding allowing employees to work from home, amid the coronavirus outbreak.

Currently, there are restrictions on WFH (work from home) under the OSP (other service providers) regime.

India’s information technology (IT) industry says that the losses due to coronavirus outbreak is minimum as of now and the damage may go up if the disease could not be contained soon, said a report in Mint citing the view of top executives in the sector.

India's top IT firms including Tata Consultancy Services (TCS), Infosys, Wipro and HCL have a good presence in China, the epicentre of the disease and Indian industry executives said they asked employees to work from home or remotely from other locations, the report said.

Early this month, former NASSCOM president R Chandrashekar had said that India’s information technology services sector is facing adverse impact on the operational front following the outbreak of COVID-19 in several countries, reported PTI.

Chandrashekar noted that overseas and international travel had been impacted following the scare.

“While the lot of the industry today is about remote services, it is certainly backed by a certain percentage of actual travel and face-to-face interaction as well. So, complete elimination of that will obviously have an adverse impact,” he said.

Pharma sector faces raw material challenge

The coronavirus outbreak in China directly affected the pharmaceutical sector of India as the raw materials are imported from that country.

India imports bulk drugs/active pharmaceutical ingredients (APIs) for producing medicines including certain essential medicines from China. The government has earlier said most of the imports of the bulk drugs and APIs are being done because of economic considerations.

Due to the high dependency of API from China, the Indian pharma manufacturer is already looking at raw material challenges. With the bulk of APIs coming from areas around Hubei and Zhejiang provinces, the situation is grave, said Sanjay Jha, Director, Colmed, Mumbai-based medical supplies company.

India is dependent on APIs from China especially for antibiotics, Vitamin C and D.

Early this month, the government had restrained the exports of certain active pharmaceutical ingredients and formulations amid reports of positive coronavirus cases rose in different parts of the country.

In a notification, the government put curbs on the exports of certain active pharmaceutical ingredients (APIs) and formulations, including Paracetamol, Vitamin B1 and B12.

Accordingly, the exports of 26 APIs and formulations require licence from the Directorate General of Foreign Trade (DGFT).

"Export of specified APIs and formulations made from these APIs ...is hereby restricted with immediate effect and till further orders, " the DGFT said in the notification.

Another problem that the pharma sector faces is the uncertainty on the exports front, especially to the markets in the US and Europe, where COVID-19 wrecked havoc after China, said a report in Business Today.

Following the stringent travel restrictions put in place between Europe and the US, Indian pharma companies are sceptical about exports to these regions, the report said.

-- With inputs from agencies

Updated Date: Mar 20, 2020 17:58:20 IST



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