Covid-19 continues to shock the global economies as cases rise around the world. As India records more than 100 patients, the novel coronavirus does not look like slowing down anytime soon, which is bound to leave long-term impact on the economies of several countries at one time. This means there could be a global coordinated collision on GDP and economic activities.
People across the world have already stopped doing normal activities such as shopping in malls, eating in restaurants, taking flights and public transportation – essentially activities which involves movement of people and assembling in one place. Retailing, tourism and transportation – which form the trinity of service sector, are experiencing an enormous impact. This is leading to disruption of normal work, office activities and production. The fear is real and building tremendously. Whilst it is tough to gauge the actual numbers, but the economic impact is inevitable, and would persist for a long period of time. The impact is getting felt more by the medium and small enterprises, which do not have the resistance to endure a protracted economic slowdown. This could lead to potential defaults from some of the smaller enterprises. Things could continue to remain bad, and even after that the economy recovery would be fairly measured. Even though the stock market could revive after decline in cases and/or discovery of a vaccine against the virus, or in reaction to the virus getting contained, the detrimental impact could sustain for a long period of time. For the smaller businesses, the recovery time is longer because their balance sheets and cash flows are not healthy enough to hold out a slowdown.
The ripple effects have been clearly visible across Maharashtra, where auto ancillary units and steel companies have been hit the most. Both Indian as well as foreign car manufacturers have been impacted, especially the ones transitioning to BS6 emission norms that have been outsourcing. Micro, small and medium enterprises of the state that are part of the global supply chain have been the first to feel the pinch of the pandemic outbreak. Whilst one could see this as an opportunity for local manufacturers to fill the vacuum, Indian government’s move to suspend visas meant that regulatory testing of these products by global sources would get affected. This comes right after the auto industry was just about finding its way out of the slowdown.
Nashik hosts over 9,000 industrial enterprises, many of which are auto ancillary units. Many companies tied to global supply chains are bracing themselves for tough times ahead. Over the last few days, programmes of industry associations and visits by international delegations have been called off. The authorities have also asked industrial units across Nashik to steer clear of holding huge gatherings and implement adequate measures to ensure proper hygiene standards are maintained. Although masks and sanitizers have been provided to employees, there is a wave of fear amongst the labour class if the epidemic could be used as a pretext to terminate their jobs. Aurangabad which has around 4000 enterprises operating primarily turmoil in auto, steel, pharma, liquor and seed sector, are also facing the heat of the global turmoil. Auto and steel industries have suffered the most.
Industry watchers are also claiming that the global pandemic outbreak could also help indigenize the local industries by developing their own markets. There have been calls for greater government intervention to mitigate risks arising from restriction of imports and existing disruptions to supply chains.