The world is currently facing its greatest crisis, the COVID-19, which is referred to as ‘Third World War.’ The pandemic has impacted significantly the economic and financial well-being of millions of people and organisations globally. There is a complete or partial lockdown in more than half of the economies in the world, to prevent the spread of Coronavirus, due to which there is a slowdown in overall demand, disruption in supply chains, issues with logistics, and lockdown of routine operations. The overall slackening of demand has had an impact on the prices of nearly all commodities. As per the UN’s Trade and Development Agency (UNCTAD), the overall impact estimated on the global economy is expected to cost about US $2.7 trillion, which is equivalent to the GDP of the UK. It is however too early to assess the effect since no one really knows when the problem will reach its peak.
COVID 19 started from the Wuhan city of China in December 2019 and had been declared as a pandemic by World Health Organizations on March 11, 2020. Countries that are severely impacted are the US, Italy, Spain, Iran, China, Germany, France, and the UK.
The Indian economy is no exception, foresees major implications on the sustainability of business and employment. As Prime Minister Narendra Modi said in his address to the nation when he announced a 21-day lockdown, if this pandemic is not contained, it could set us back by decades.
Companies are forced to implement work from home. There are many sectors such as Manufacturing, Retail, Hospitality, Airlines, Construction, Transportation, and Utilities, where such work arrangement is not possible. They are left with no other option but to close down their operations for the present. Micro, Small and Medium Enterprises (MSMEs) which account for 97% of total employment across India are facing the biggest challenge, as they often lack sufficient cushion in terms of financial strength to tide over the pandemic situation.
According to the Confederation of Indian Industry (CII), India’s GDP could fall below 5% in FY 2021 if policy action is not taken urgently. CII estimates that the government should implement significant, strong and rapid fiscal stimulus measures to the extent of 1% of GDP, that has to be focused to help the poor financially and enable them to live through this crisis.
There are several questions that arise, for which answers are not clear at this point in time. What is clear is that this crisis will impact everyone in the world deeply in the months and perhaps years to come:
a. Will Digital transformation become a way of life rather than just an important function for organizations?
b. Will companies be forced to adopt the latest technologies and accelerate their usage for their survival and growth?
c. How will companies equip and enable their workforce to work remotely from their homes? What insights will companies gain through the current lockdown, to help them initiate change in the way work gets done effectively?
d. How will Organizations transform the way they engage with their customers? How will they reach out to customers digitally and remotely, along with physically, to enhance customer experience?
e. How will digital payment be further prioritized, democratized and transformed?
f. How will digital ecosystems be leveraged to access customers and manage supply chains to a much larger extent than what is being done at present?
g. The role that governments across the world will need to play by way of either making or enabling significant investment in digital innovation platforms to support businesses.
According to Ben Bernanke, Former Chairman of the US Federal Reserve, if there’s not too much damage done to the workforce and to the businesses during the shutdown period, however long that maybe, then we could see a fairly quick rebound.
Summarised by Minal Agarwal, Program Manager ISB-CBM, Indian School of Business
References:
1. https://www.bloomberg.com/graphics/2020-coronavirus-pandemic-global-economic-risk/
2. https://www.cnbc.com/2020/03/25/former-fed-chairman-ben-bernanke-sees-very-sharp-recession-followed-by-fairly-quick-rebound.html
3. https://msme.gov.in/sites/default/files/Annualrprt.pdf