How To Cope With Post-COVID-19 Disruption
Post-pandemic prediction can’t be a soothsayer’s job. Preparing the economy from a tremendous shock and staying indoors for a month in some states or longer, as the rate of spread of COVID-19 hit persons accelerates, is the biggest challenge. 
India is not a city state like Singapore or a financial hub like Hong Kong. The optimists expect the lockdown to be lifted by the 14th April while the less optimistic put it to the end of April. We need to think of the strategies and actions phased over short, medium and long term with matching resources right now. These should be both sectoral and geographical specific. 
While we are the leading global pharmaceuticals suppliers, the low and inefficient health sector management with historically low outlays suddenly got a wake-up call with the spread of COVID-19 and the need for public health systems to step up their capabilities. Yet, India has responded remarkably well to this call, to the greatest consternation of the rest of the world. 
The country, with a diversity unparalleled anywhere in the world, is the biggest challenge and opportunity to the governments. Diversity has the capacity to cross hold risks across segments and has an innate resilience when calamity befalls. It also provides scope for innovation as people think more actively under pressure than in leisure. For example, there have been more webinars during the past one month than during the past six months. There have also been more video conferences and skype calls as people started working from home. This may gradually turn out as the new order of functioning.
One of my nieces from Bengaluru tells me that as the director of a Union government organisation, working from home became a true challenge for her as deliverables came to rest with her rather than with other members of her team. Even the forgotten kitchen started demanding her time, with children demanding newer tastes and new dishes. This is making her work for 14 hours instead of the usual seven hours in office. There is a whole paradigm shift in the work environment, not just for her but for many like her— with no gender discrimination. 
What would be the future like? Very many organisations could find new economies of scale in a combination of work from home and work at office. More factories will have to think of reworking their supply chains that have been thoroughly disrupted due to the coronavirus. The small enterprises manufacturing gloves, sanitisers, masks and medical emergency kits to combat the coronavirus will face near extinction.  They should expect this to happen and therefore prepare now itself to re-engineer their processes to manufacture newer products and find new markets. They will notice that institutions and persons that were after them during their need will turn away their faces and are likely to even hold up their bills in their search for finding cash margins for fresh initiatives. 
Our country will have to reinvent itself in workspaces and relationships like never before. In this process, at the micro level, enterprises will re-engineer their production and processes and search for new markets. 
Amid a supply driven crisis, unrest, dwindled resources of every kind, as also eroded markets, the micro, small and medium enterprises (MSMEs) will require sustainable process consultants to rescue them at affordable costs. Here, the governments, in looking at the sovereign dues and the banks looking at the stuck balance sheets of MSMEs, should learn the art of turn-around management or seek the help of experts in turn-around management.
Every nation will be on the horizon of uncertainty. Risk mapping will be difficult. Everyone has been a loser. Non-performing loans will surge unless the thresholds change. Indian regulators need not wait for the world to guide them. They can guide the world. Blue Cross Blue Shield Association (BCBS) has already provided for applying thresholds for the small and medium enterprises (SME) sector as per the needs of the country. The time for action is now. The threshold should move to a 180 day horizon till December 2020, subject to a review after six months. This will automatically provide for higher leverage in lending for the MSME sector, the nerve wire of national production that has been contributing 35% of gross domestic product (GDP), 45% of exports and employing 112million persons.
The poor and daily wage earners, the hawkers, the wayside eateries, many disabled, contract workers – both skilled and unskilled, need government subsidies, even salary buffers, supplies and cash to meet their daily needs for at least three more months until the industries and enterprises are ready to re-employ them.
Fiscal responsibility under these circumstances of both the State and Union governments, already hit by the lowest ever tax returns, requires out-of-the-box thinking to meet the situation. Several relief funds of the CMs and the PM, private donors and even CSR funding, even amid the near 10% hit on most corporate balance sheets, would be inadequate for the revival of the economy. It may take at least nine months to one year to come to a new normal which would be far less than what we had in the slowing economy. 
Even if people have cash in their hands, which itself is doubtful, they will not get the goods and services as the cycle of slowdown-lock-down- slowdown of the economy will generate supply-driven inflation. Scarcity stares in all areas. 
Courage is the watchword. In times of distress people display amazing unity while immediately after normalcy is restored the same set of people will most likely diverge. While the demand to lift the lock-down in toto will surface with more vigour than now, it would be prudent to stagger it, to restore the efficiency of the health sector infrastructure, doctors, nurses, para-medical staff, on the one hand, and to ensure that the wheels of production get back to normalcy gradually, on the other. Second, the discipline enforced should be redirected to finance, transport and manufacturing sectors.
The focus of trade will suddenly demand new protectionism, new direction of investments, newer regional allies in trade and new relationships. The denuded investor firms and the huge number of corporates off-loading the bonds in the markets for liquidity are bound to put pressure on the financial sector. This recession is very unlike the 2008 or even 1930 and it will be a prolonged one and will be widely spread across 200 nations of the globe. 
Banks are system driven and not enterprise driven. Unless the instructions are fed to the system, the concessions do not take effect. In several banks, even the usual half-yearly reviews of several accounts on a regular basis did not take place. The disaster today is extraordinary and requires extraordinary speed of action post the new normal. 
At a time when the demand for credit is at the lowest level due to several manufacturing and trading enterprises shutting their shops due to the lockdown and are seeing the future as more uncertain than now, liquidity doors have been kept open by the Reserve Bank of India (RBI) as though that was the problem area that required urgent attention. Even during the past six months RBI has been extremely accommodative to banks both in respect of capital buffer and liquidity commitments. But credit did not move to a higher zone in non-food segments. 
“These capital and liquidity buffers are designed to support the economy in adverse situations,” as the Fed said in a statement. Fed’s other hope is exactly what India incorporated is looking for: less rigidity from the banks in extending the required debt, post pandemic. COVID-19 has caused serious disruption to global supply chains and has a huge impact on financial markets and trade ecosystem. It is important to retain the customers and governments post-pandemic must help them rebuild their lost supply chains to operate sustainably.
India’s biggest advantage is its demographics and therefore, the future needs to be addressed with alacrity so that entrepreneurship will not be governed by the hoary past but a bright future. 
(The author is an economist and risk management specialist. The views are personal.) 
Ramesh Popat
3 years ago
everything will be taken care of to the extent possible. emergency like situation handled so far in the best possible way. damages will be shared by all.
3 years ago
loved reading this article. GOI has been releasing tranches of relief+support measures both monetary & fiscal...but essentially this problem is an Healthcare one. Distancing + enforcing Hygiene will possibly contain the contagion as the World figures out a Vaccine (still a year away in best case scenario). While the current relief measures are about less than 2% of GDP, its a good policy to drip feed the relief measures upto 5% of GDP and not fire all your arsenal in one go - remember we still have a long road ahead before we are rid off this virus menace.
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