The roaring uncertainties have become a reason for Indian consumers to rethink about their spending on discretionary goods and investment of money. This low demand will be translated into economic and business constraints, low investment in capital projects and delay in recruitment.
India is struggling to bounce back to normalcy amidst the gradual ease of movement restrictions but some uncertainties cease to eliminate. The social distancing norms, safety concerns and regional lockdowns will result in a vicious cycle of reduced demand and supply. According to a survey conducted by Deloitte, the hiring decisions and spending habits will be affected the most. Thus, five factors will have a huge role in deciding the speed and time of recovery.
The accessibility of treatment and vaccines will be the most primary aspect and it is directly proportional to the economic recovery. The second factor is contagious fear or causation of fear among people. The longevity is gradually infecting more people. These fears can change their demand and purchase patterns, consumption behaviours while business is trying to restore everything. The third factor is the intensity of supply-chain disruptions across the financial sector and various other industries. The initial impact was limited for only some industries like manufacturing and hospitality but gradually it spread everywhere. The extended pandemic and several outbreaks can adversely impact the production, capacity building and will finally lead to slower credit growth. The strong domestic consumer demand which is the primary pillar to growth will be the fourth factor. The government support and good rainfall in a rural area can improve their condition and while the urban sector demands especially in Delhi and Mumbai will be low-slung due to the spread of the virus. Only better-synchronised coordination can curb the infection and be a reason for the growth. The evidence of such harmonised activities is less due to the different stages of infection. Lastly, the effectiveness of fiscal and monetary stimulus by the government will fix the human cost and economic disruption as India is going through a new normal. So far, the government have declared health, tax, business, financial and social benefits in responding to COVID-19. Other fresh measures aiming at infrastructure, employment opportunities and regulations will build a sustainable recovery. In short, the government have a huge hand in curbing the virus disruptions and boosting the economy.
We are highly optimistic and assume that the contagious virus will be under control by December and thus consumer spending will rise. Under the most likely situation, there will be economic recovery from FY 2022 after having a negative growth in FY 2021. If the coronavirus stays for a longer time, some industries like essential goods retail, pharma, technology and communication industry will storm in due course of time. The hospitality and banking sector will see difficult times and every industry must prepare themselves in uncertain situations while hoping for the best.
