The pandemic has an adverse effect on almost every business which led to decline in profits and reserves accumulated by businesses. The MSMEs were the worst affected in the smaller segment while Construction, Hospitality, Tourism, Aviation, and Retail are going through a rough phase in the large-scale segment.
The pandemic has changed the ways of life as well as livelihood. The unknown virus has hugely affected the ways and functioning of businesses. The effects have been largely disruptive and volatile for the owners. The second wave has resulted in erosion of the savings of the households and reduced overall demand which has affected the entire economic system. Consumer confidence is on record low levels since the country saw disastrous second wave. The lifting up of lockdown has brought new hope for business owners. The income and employment levels are still below normal. Loss of jobs, decrease in jobs and cash crunch are the major problems people are facing during the pandemic times.
The MSME’s which are often referred as the backbone of Indian economy are the worst affected. According to recent survey conducted by data firm Dun and Bradstreet around 82% of businesses have experienced the negative impact of covid and around 70% of them will almost take a year to cover the losses and get back to the pre covid levels. The major challenges faced include lack of consumer confidence- The second wave resulted on mass scale repercussions for people due to shortage of hospital beds and oxygen, this has dwindled the customer confidence to get back to the market and make purchases. Cash crunch and liquidity is also a major problem for the owners as their past invoice payments are blocked while they still have to bear the fixed cost expenses like interest, rent, electricity payments. Many owners are also forced to halt production due to weak demand and labour migration.
The large business is also going through a rough phase. Quarter 4 results somehow gave a sense of relief but the second wave has again caused a devastating effect. Companies like Tata Motors, Hero MotoCorp were forced to halt production due to surge in covid cases. The Nonperforming asset numbers are also a matter of concern. A major problem faced by large scale industries include high operating cost- large scale industry usually have high operational cost and lack of sales result in low operational efficiency, also many companies are struggling in debt repayment which can be a matter of concern for banks and NBFC. Also, the lockdown restrictions have put on hold the hiring of new employees and new projects. However certain sectors like FMCG, Pharma, IT, and Telecommunication have remained intact and mostly unaffected.
According to research agencies, Vaccination can be a major booster for the economy. The Reserve Bank of India has already announced liquidity packages under the emergency line credit guarantee scheme worth 4.5 lakh crore. The government is also planning to boost the healthcare sectors so that the effect of the upcoming waves can be minimized. Tax payment methods were also eased. The government has further said that it will be announcing sector-specific packages after accessing the situation.
By - Sushant
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