Unlock 1.0

The COVID-19 pandemic has been haunting businesses in this part of the world extensively since mid-March 2020. While the lockdown was a brave and important step to contain the virus at its primitive stage in India, today it is a fact that the 76 days long nationwide lockdown has failed to do the job. In this era of COVID-19, we no longer can stay at home as for most of the people their survival is at risk. Governments are also losing revenue as businesses are shut. As we unlock our economy gradually, business is of course not the way it used to be, the markets do not have much business currently, but ample amount of challenges stand in front of the business community as businesses reopen.

Indian exports dipped 60% in the month of April 2020 compared to April 2019 and unemployment in the country stood at 23% in April 2020, as businesses now reopen, with limited operations, the following challenges hunt their survival,

Lack of liquidity

Most of the businesses falling under the ‘non-essential’ category have drained up all their reserve cash during the lockdown. As businesses now, are trying to get back on track, there is a huge issue of liquidity, certain expenses that some business may have curtained during the lockdown such as rent and wages are back along with huge payment pressure of old creditors as well.

The government relief has failed to reach small businesses and ultimately, small and medium business are crushed by huge debt burden and are paying interests on working capital loans in spite of low revenues.

Low sales

Many businesses have faced low sales or no sales at all in Q1 of FY/20-21 due to the lockdown. As businesses reopen, there is still no certainty of revival. The retail sector is one of the worse hit and while the retailers drown, they have also taken many associated industries underwater with them, one of them is the appeal industry, that is currently facing a massive capital and labour issue combined with low sales and production. Many apparel manufactures are still not open even after the easing of the lockdown as they are avoiding unbearable overheads at the moment.

Uncertainty of recovery

Due to uncertainty of economic recovery due to COVID-19, many businesses have sifted focus from their primary products and moved towards reliable essential products at the moment. For businesses owning garment factories and huge plants, mask and PPE kit production is been observed as an opportunity to sustain in the business till things get back to normal.

Its too early to predict at the moment about what will this trend lead to, but certainty once things start getting back to normal, the demand and supply curve for many products will certainly go haywire.

Suppression of production

As demand for consumer non-essential goods have globally fallen, a combination of lack of demand and labour mixed with financial uncertainty has forced many factories to shut down. With rapidly increasing COVID-19 cases and no vaccine or anti-viral drug still in the market, the sense of fear among the masses is still present, it has forced many plants to remain shut even after the easing of the lockdown. Low production will cause shortages and supply issues for many products specially in the FMCG sector.