Evaluate your money crisis; This is no time for excuses

A lot of projections are out there now. A reading of headline numbers suggests that the world is all set to get into an economic contraction. Major economies are all set to not just slow but contract by at least 5 per cent, according to International Monetary Fund releases. India’s economy is expected to grow at the slowest pace in decades, close to 1 per cent. Some analysts expect the economic growth to come to a standstill at zero. A large number that stood out was that every single day of lockdown costs India’s economy $4.5 billion or Rs 33,700 crore a day. One cannot put a value on the lives lost. It is also essential to understand that there cannot be any eradication of the disease until a vaccine or an anti-viral is found. It takes years to create one. It is going to take months or perhaps a few years to crack this one even with a collective effort by governments and big pharma.

We are in a backdrop that was barely imagined by anyone. World events like these can shake the foundations of the way we live. When that happens, there is no going ‘back to normal’. The government last week released guidelines on things to do at the workplace. The sanitisation, physical distancing and workplace rules will change forever. Businesses that can migrate to digital delivery will do so quickly. However, many would struggle with that migration. The worse hit is likely to be small and medium enterprises. They are hobbled by poor access to money. Over 4 crore small and medium enterprises provide a livelihood to over 10 crore workers. That is over 40 per cent of the total workforce in India. The hygiene and prevention requirements specified are likely to be tough for businesses to enforce. They would have to work with a lot fewer people. If people are unable to work from home, many are likely to be jobless.

Shaktikanta Das, the RBI governor, stated policy actions last week. It reveals the state of the economy. Electricity demand has slumped 25-30 per cent after the lockdown announcement on March 25, 2020. Automobile production and sales, port freight traffic, declined sharply. The manufacturing Purchasing Managers’ Index or PMI, a key forward-looking indicator of future purchases, fell to the lowest in four months in March 2020. Suppliers revealed that the delivery time has extended for the first time in five months, indicating disruptions in supplies. The PMI for the services sector contracted in March 2020 as exports slumped by 34.6 per cent over last year, more severe than the global financial crisis of 2009.Behavioural surveys by several consulting firms and agencies reveal that ‘going out’ would have a new meaning in the post-Covid-19 world. Travel and tourism, hotels, retail, malls, entertainment and shopping would all get redefined.

The agriculture sector may save India of the blushes. By April 10, 2020, pre-monsoon kharif sowing grew strongly by 37 per cent over the last season in principal kharif crops. The meteorological department has predicted a normal monsoon. A key indicator is also a sharp growth in tractor sales for 11 months to February 2020 over the same period last year. “These early developments bode well for rural demand, supported as they are by accelerating fertiliser production up to February 2020,” the RBI governor stated.Agriculture employs over half of India’s workforce. While the rural demand could improve over previous years due to a sharp revival in agriculture, the slump in public demand would bring the Indian economy to a grinding halt. India would do better than many countries by registering a slow growth when all other economies contract.