Decoding the impact of Coronavirus on the retail sector

The economy was already in the slowdown phase for the last couple of quarters, and it had experienced the slowest growth in the last six year, when it grew only at 4.7 per cent.
Decoding the impact of Coronavirus on the retail sector

When the COVID-19 is spreading like wildfire, governments have no other better options than lock-down to counter the pandemic. The global economy is struggling between the devil and the deep blue sea, and small businesses are the worst hit. Retail, especially the physical retail is one of the worst hit sectors as the lock-down will be continued till mid of April. Though convenience and departmental stores are exempted from the lock-down, their footfall falls to a great extent. But, apparel, jewellery, mobiles & electronics, sports goods, and many other retail segments are completely closed in the wake of the ongoing health emergency.                  

Covid Impact

The economy was already in the slowdown phase for the last couple of quarters, and it had experienced the slowest growth in the last six year, when it grew only at 4.7 per cent. In such a challenging scenario, things become further aggravated when coronavirus spreads the tentacles in Indian markets. With every passing day, the crisis is mounting like never before and its impact can be seen everywhere. According to the Federation of Indian Chambers of Commerce & Industry (FICCI), besides the direct impact on demand and supply of goods and services, decreasing cash flow is another big problem for the businesses. On the one hand, retailers are missing items in the inventory, on the other hand, amidst reduced cash flow, managing salaries of the employees and clearing payments of small vendors and artisans, further increasing their worries.  

As all the manufacturing activities in the retail sector have come to a standstill under the lockdown state, things will take at least 30 to 45 days to get normal after the current shutdown. But, if the lock-down is extended for another two to three weeks, the after-effects will be very critical for the small players in the retail sector. So far, the seriousness with which government, healthcare sector, and police administration are working to combat COVID-19 pandemic, most of the industry experts expect that the situation will improve within a fortnight, but citizens too must have to follow the guidelines issued by the health ministry to countervail this disease as soon as possible. 

Reforms to mitigate the loss

Recently the Ministry of Finance and Reserve Bank of India have also taken some crucial decisions to mitigate the ill effects of the current pandemic on the Indian Economy. Rs 1.7 lakh crore spending plan is announced by the government to improve the health of the economy curb the impact, RBI also comes forward as a frontier to support the country’s economy with a host of measures. The reverse repo rate was cut by 90 bps to 4 per cent and a moratorium of three months of EMIs on all outstanding loans is also announced by the Governor of RBI. But, these are short-term measures; there is also a need to make some adequate structural changes in the economy.

In many product categories, India’s retail sector depends on imports from China and European countries. Under the Make in India programme, there is an urgent need to focus on strengthening the manufacturing sector of the country, and there should be minimum dependence on foreign manufacturing. There is a close connection between retail and the manufacturing sector, and to protect the former, the latter should be equipped with advanced infrastructure and friendly policies.

The article has been authored by Puneet Jain and Yatin Jain, Directors, ODHNI
 

 

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