Are Industries Prepared To Face Another Lockdown?

Coronavirus induced lockdown made all the nations witness a sharp and unexpected decline in their economies. As uncertainty continues, withdrawal of investments, forced halt of all economic activities, crash of the markets is the end result.

It was indeed challenging for various companies to respond to a sudden nationwide lockdown. ‘Work From Home’ and ‘Social Distancing while being completely covered’, became the ‘new normal’. However, even with the relaxations introduced, the number of infected cases shoots up.

As on July 17, 2020, the number of coronavirus cases, in India, crossed one million; another Lockdown is soon anticipated, some industries are ready, and some are in the process of getting prepared for it.

Response of some Industries to anticipated lockdown

• Automotive Industry

An Industry Body Executive had mentioned that the pandemic had caused disruption in a sector already hit by weak demand. India’s auto sales will take three to four years to return to peak levels, as was the case in 2018.

According to data of Society of Indian Automobile Manufacturers (S.I.A.M.), the fiscal year witnessed a fall in sales of cars, sport utility vehicles, motorbikes and trucks by 75 per cent from a year ago to about 1.5 million vehicles. Rajan Wadhera, the President of S.I.A.M., told the reporters, “The impact of COVID-19 is going to be very harsh on the auto industry. As of now, we are staring into a profound slowdown.”

• Pharmaceutical Industry

Sailesh Raj Bhan, Deputy Chief Investment Officer-Equity and Fund Manager of Nippon India Pharma Fund, stated that the pharma sector earnings could double in the next four to five years. This is evident as the share of domestic products has risen almost 40-50 per cent in large companies in India, giving them much stability. He had also added that the Indian pharmaceutical sector’s ‘return’ will be ‘bigger and bolder’ than the growth it has seen in the last ten years.

When compared to other industries, the pharmaceutical industry might be a bit more equipped to face the next lockdown—the reason being the need for medical drugs to provide immunity to humans.

• Cement Industry

The initial lockdown was a massive blow to the Cement Industry. It resulted in labour scarcity and a possibility that the government would stop spending on infrastructure and related activities. If it is so, then it will lead to a reduction in the capital expenditure and impacts the infrastructural growth. With the relaxations, came steady demands and moderate prices.

As of June 25, 2020, India Cements’ profits dropped by 49 per cent. Furthermore, it is considered that if the pandemic worsens and ‘the lockdown’ is back in action, then it can affect the liquidity of the cement players.

• Fast Moving Consumer Goods (F.M.C.G.) Industry

Having experienced shallow demands at the beginning of the lockdown, there has been a sharp growth in its sales in June, leading the industry to revert to its former position. According to Nielsen, a trusted global market research firm, consumers have prioritized fundamentals such as healthy foods, home hygiene, medical, fitness, education, home entertainment, and investment as they prepare for uncertainty caused by the slowing economy.

Around 62 per cent of those that were surveyed by Nielsen stated that they intend to increase online shopping by more than 20 per cent, showing that there will definitely be a shift to e-commerce. The FMCG also seems equipped to face the anticipated lockdown.

• Manufacturing Industry

The massive loss faced in the initial phase of lockdown was accompanied by labour scarcity. Manish Bansal, Director at Window Magic (a leading uPVC brand in India), believes that people will have to learn new standards in manufacturing. The needs to industry look into the future and change its business model to adapt accordingly. The use of technology was low in this field. Now, Digitization is no longer an option, but mandatory. Slow adoption of technology will help the manufacturing industry to reach out to the potential customers, suppliers and lenders via ‘e-marketplaces’.

With the next lockdown at hand, it will be safe to assume the above mentioned uPVC brand would be the one last to get affected. The reason being producers from this business-facing enormous demand from the customers for quick deliveries of their primary products, doors and windows.

From the industries’ responses, it is clear that new forms of conducting business have to be adopted if they are to continue in the markets. Although ambiguities do exist, the industries are ready to accept new business models, to ensure job security to several citizens, as well as revive the Indian economy.