Firms that can survive with social distancing to spring back faster: Report

The Covid-19 crisis will leave companies with a new normal and firms that can survive with social distancing, such as digital platforms, and online learning are likely to spring back to recovery and shall thrive soon, according to consulting firm GATS.

However, for industries which will struggle in reforming its workplace in terms of adapting to the new social distancing norms, the recovery will be harder and will take longer, according to Nalin Tayal, Managing Director, GATS.

Sectors with complex value chains, particularly electronics & automotive products, would be most impacted. Services would be most directly impacted through transport and travel restrictions. It is, however, expected that 2021 would see recovery, but it is dependent on the duration of the outbreak and effectiveness of policy responses not just in India, but across the world.

Though, manufacturing is being carried on for specific essential goods like medicines, PPEs, FMCG items like soap, sanitiser, textile like masks, heavy industries (mainly furnace based) like iron & steel but largely manufacturing seems to remain in red with automobiles, textiles & apparels & construction taking the major hit. As the manufacturing sector takes a hit, so the backward chain of mining and electricity, Tayal said.

As per the Power Ministry, electricity consumption has reduced by 20 per cent during the lockdown period mainly due to low business activity. But the comparative impact would be less as compared to the manufacturing sector.

MSMEs contribute almost 30 per cent to the GDP, so their performance is crucial for the growth of the economy. Already strained due to poor credit flow, lower demand, cash flow issues and diminished revenues due to lockdown will seriously impact the sector.

Tayal said the MSME sectors are among the worst-affected by Covid-19 due to massive economic shutdown by the containment measures as these enterprises are having debt obligations and are a cash poor sector.

Incidentally, this sector is also an engine of vulnerable workforce, and they will be pushed to poverty if left unaddressed.

However, the most impacted sector due to coronavirus is the services sector. Barring few online services like e-commerce, online education, online entertainment & gaming, almost all service industries including airlines, hospitality, logistics & telecom are badly affected. The slow growth in the service sector will be the major reason for growth of Indian economy at around 2 per cent in 2020.