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CORONAVIRUS - The situation in India

​1. General situation

The spread of the coronavirus started relatively late in India, compared with other countries. As of 25.05.2020 , 140.215 coronavirus positive cases have been confirmed in India with 4041 deaths (Ministry of Health of India) with 77949 active cases. The 4 states with the most number of cases at present are Maharashtra (50231), Tamilnadu ( 16277) Gujarat (14063) Delhi (14053). In the last couple of days the infection rate has spiked exponentially with the highest spike in the past 63 days of 6417 cases across India today. Nearly 3 Million tests have been conducted so far.

During the COVID crisis, on 22nd May, India (by its Health Minister Dr.Harshvardhan) assumed charge as the Executive Board Chairperson of WHO.

For the most recent official number of cases Government of India official figures please see https://www.mygov.in/covid-19  
Detailed figures per state can be found on https://www.mygov.in/corona-data/covid19-statewise-status 

2. Preventive measures

India is currently in a nationwide lockdown ( in its 4th duration – Lockdown 4.0 ) until May 31st what is popularly known as Great Indian Lockdown (GIL). The nation has been divided into 3 zones: Red Zone, Orange Zone and Green Zone based on degree of infection. The Red zone being the most infected and within the Red zone there are Containment Zones which have higher concentration of infections. The Indian Government is following the WHO guidelines very strictly and are following all the measures.

The early lockdown decision and strict travel restrictions, social distancing and mobilizing sensitizing programs for preventive measures of the Government have shown slow progression of the virus has averted the exponential spike of the infection and mortality rate barring the last few days. The measures have been well appreciated by several world leaders and also WHO.  

All commercial passenger aircraft flights in and out of India stand currently suspended. Although all the stranded citizens are facilitated to be return back to India by evacuation flights and also the foreign citizens stranded in India have been facilitated to be evacuated by respective countries.

https://www.mohfw.gov.in/pdf/Guidelinesforinternationalarrivals.pdf

All commercial passenger aircraft flights in and out of India stand suspended. For the latest travel advisory by Indian Ministry of Health and family Welfare, see https://www.mohfw.gov.in/ under travel advisories.

3. Exit strategy

Notwithstanding the nationwide lockdown, in those areas where no COVID-19 cases have been reported, some conditional relaxations have been given since May 19th and more and more relaxations are being tried out. Currently all business/industrial activities are restarted under strict guidelines with SOPs for each operation.

IT Services industry which majorly located in bigger cities has already augmented itself by moving almost 96% of its work force to WFH model. Their operations are running smooth.

Domestic Train has been started from 18th May to operate to 15 major cities from New Delhi and the Domestic Air Travel is open from 25th May onwards. More relaxations with number of additional trains to run from 1st of June and other measured relaxations are on the anvil.

https://www.mohfw.gov.in/pdf/Guidelinesfordomestictravel(airortrainorinter-statebustravel).pdf

A detailed description of measures can be found in the Revised Consolidated Guidelines of the Ministry of Home Affairs (MHA), dated 17.05.2020.

https://www.mha.gov.in/sites/default/files/MHAOrderextension_1752020.pdf

4. Economy

a. Economic impact

The coronavirus pandemic has had a very severe impact on the economy and small and medium-sized companies across the country facing the brunt of the impact. Most of the businesses are under tremendous stress from working capital, labour and logistics issues among others. With more than 60 per cent economic activities shut down, as 1.3 billion people were placed under lockdown, and as the lockdown is extended, the fear of infection and health concerns started giving way to the fear of income loss affecting the workforce and the fear of survival overwhelming many businesses.

Rural India is hard hit. Consumption is the bedrock of the economy and the rural sector is the biggest driver and pillar of economic growth. About 57% of India’s household consumption expenditure comes from rural areas, accordingly the Government has announced measures to boost the rural economy of India. With thousands of migrants returning to home states, there is an opportunity for the country to push for the transformation of the rural sector. The Government has made announcements focused on giving more power to the farmers and enhancing measures for segments such as animal husbandry, fisheries and bee-keeping. The cluster-based approach announced for Micro Fund Enterprises and the push towards demand-based farming would help develop a robust agri-market in India. Effective implementation of the agri-reform, especially around APMC is likely to have significant impact from the Government’s vision of doubling farmers income.

Travel, Tourism, Hospitality and Entertainment industry is highly disrupted and it will take at least 12-18 months for them to make a reasonable comeback owing to the fear factor and self-restriction by consumers themselves.

b. Trade barriers

The website of the Indian Directorate General of Foreign Trade gives an overview of the recent amendments in foreign trade policy, for export (from India) as well as import (into India). https://dgft.gov.in/policies/notifications

Botst u buiten de EU op handelsbelemmeringen of andere problemen op het vlak van markttoegang? Laat het ons weten via handelsbelemmering@fitagency.be. Wij analyseren uw aangifte en maken die via de geijkte kanalen over aan de bevoegde instanties.

c. Measures for economic relaunch

A much-anticipated relief package to prevent large-scale job losses and rebuild the economy, is announced by the Indian Government. The Government of India’s substantial 241 Billion Euro economic package aims to support the country through the unfolding crisis and also realign its focus for future growth, by offering a package equivalent to 10% of the country’s GDP. The focus of the measures is also on structural reforms announced as part of this package showcase the country’s focus on strengthening the India opportunity, by becoming ‘Self Reliant (Aatmanirbhar)’. The traction has been directed to drive local businesses geared towards developing the domestic market to cater to the demand of the consumption-driven economy and reducing dependence on imports. At the same time, the country intends to strengthen its manufacturing ecosystem to Make in India, for India and the world. The complete detailed information on the Mega Economic Package announced by the Government are enclosed in the links.

To ensure the most vulnerable segments were not left untended, the Indian Government and Reserve Bank of India announced various relief measures. The Government infused in the initial stages about 21 Billion Euro to provide insurance coverage and rations to the vulnerable, along with direct cash transfers. The coverage of this economic package has started to blur the lines between the urban poor and the rural poor, providing support to both. This step will go a long way in driving equitable support to the vulnerable, removing the boundary of location. The initiative of formalizing the informal sector, such as facilitating institutional credit for street vendors, can form a bedrock of a targeted benefit management system.

The details of the economic package announced is here under :

https://1drv.ms/u/s!AkAEu8ykDW6YhqBj5rWTupNme_p53A?e=8FVaxF

Due to the lockdown, logistics in all its aspects is interrupted (import, export, national transport, express services). The agencies (Customs, Food Safety,..) are trying to help but the basic issue is a lack of people to unload, clear and transport the goods. The current relaxations are easing the issues slightly although the issue of migrant labours is creating several challenges to various segments of businesses. Due to the lockdown and suspending of the business activities, migrant workers have set with their families to return back to their native and that has posed several challenges including the transport, food , infection and health issues.

The Reserve Bank of India made announcements on 22nd May 2020 on its monetary policies and as a support to the COVID affected economy. The details of the policy changes are in the link :

https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR239109AC3CAC0F874527895214BDF9E76BF0.PDF

d. Economic outlook

The Asian Development Bank (ADB) projects India’s gross domestic product (GDP) will slow to 4.0% in fiscal year (FY) 2020 ending on 31 March 2021 due to a weak global environment and continued efforts to contain the COVID-19 outbreak. The Asian Development Outlook (ADO) 2020 forecasts a recovery in India’s economy in FY2021, with growth of 6.2%, supported by government reform. India’s economy recorded 5.0% growth in FY2019. (ADB report press release)

“The COVID-19 pandemic jeopardizes global growth and India’s recovery. But India’s macroeconomic fundamentals remain sound, and we expect the economy to recover strongly in the next fiscal year,” said ADB Chief Economist Yasuyuki Sawada. “Indian authorities have acted swiftly to shore up the economy hit by the pandemic.

Risks to the outlook are firmly on the downside. A prolonged pandemic would push the global economy into deep recession and further slow Indian growth. Were the virus to spread widely within India, economic activity would be severely constrained.

The report forecasts inflation of 3.0% in FY2020 due to decreased demand and lower oil prices; and then a rise to 3.8% in FY2021 as domestic demand improves.



The Indian automobile industry, already dented by a protracted slowdown before the Covid-19 pandemic struck, is now staring at a severe and prolonged disruption, due to domestic and global lockdowns and preventive measures, which have snapped major links of its supply chains, as per CRISIL Research: “If the lockdown is extended again in the National Capital Region (NCR) and Pune clusters, there would be a material disruption in component supplies to vehicle makers – both sourced locally and imported.” (Hindu Business Line article)

e. Trends

The pandemic has dented severely the demand in the economy and obviously the manufacturing & consumers goods including the durable products are under tremendous stress and the measures are taken to alleviate the issue of demand. The Government has focused on creating long-term market demand and addressing supply side constraints in the short term.

The consolidation and potential disinvestment of PSEs in strategic sectors is another strategic step that will allow Indian PSEs to consolidate, scale and leverage stronger balance sheets to operate at global scale. It would also allow achieving larger disinvestment targets for the Government.

The Indian Government has announced various structural reforms, which will support long-term growth across sectors. These reforms would go a long way in positioning India as a favorable alternate destination for manufacturers looking to de-risk their supply chains. The formalization of the unorganized sector through the issue of appointment letter and extension of ESIC coverage when combined with proposed new labour codes will create an effective labour effective market. The introduction of the "One Nation-One Ration Card" marks the digitalization of the public food grain distribution system, enabling ease of access to essentials. “One Nation–One Market" also evolves the integration of the domestic retail ecosystem thus enhancing the reach for retail products.  With more than 3,300 industrial parks/estate/SEZs to be mapped on the industrial information system and ranked, industrial cluster up-gradation would lead to enhanced competitiveness.

The Government has also facilitated private sector participation across industries, even ending the Government’s monopoly in the coal sector. This move is expected to improve productivity and increase technology infusion. The reforms across mining, power, defence and civil aviation, focus on enhancing private sector participation. The impact of these reforms will take effect in the medium-term but will go a long way in providing impetus to the Indian economy and job market. New growth horizons have also been considered to enhance India’s progress in segments such as space and atomic energy.

During the lockdown period, positive trend has been the confidence in the Indian economy by the leading Technology Investors from across the globe. One of the major Indian corporate Reliance Jio has raised more than 10 Billion Euros in the last one month from FaceBook, Silver Lake Partners, Vista Equity Partners , General Atlantic Partners and KKR. The trend is likely to continue and more investments are expected.

f. Short term opportunities

Majority of Indian companies are occupied in steadying the operations and one of the focus has been to work on cost effective processes and to enhance productivity. This opens up opportunities in the Services segment – any Flemish service provider who is able to provide cost optimization processes and productivity enhancing tools as an integrated management tool, is an opportunity across the segments and geographies.

In a recent Consumer Sentiment Snapshot, Boston Consulting Group (BCG), projects  differences in spending that reflect India’s large income disparities and diverse demographics. Specifically, lower-income and younger consumers show a higher propensity to plan to reduce their spending, while older and higher-income groups exhibit more resilience and are more likely to expect to maintain or increase their spending. (BCG Consumer Sentiment Survey Snapshot)
 

g. Long term opportunities

Based on the policy measures announced several sectors have been opened for privatization / more FDI especially in the areas of space , atomic energy , coal mining, power, defense , civil aviation, retail and E-commerce sector. This move is expected to improve productivity and increase technology infusion. This shall manifest into opportunities for Flemish products/systems/technologies/services providers with a sound tailor made strategy.

Due to the global cues of China Exodus, number of companies from across the globe are exploring India as one of the destination for relocating or expansion plans. Given some of the long awaited policy changes being effected in India and the post COVID planning, India offers opportunities for Flemish companies. 

The Indian Ministry of New and Renewable Energy (MNRE) has been taking various steps to aid the Covid-19 impacted renewable sector. It seeks to give a major push towards setting up clean energy equipment manufacturing parks. Tuticorin Port Trust, Madhya Pradesh and Odisha have already expressed their keen interest. The objective is to attract investments by companies that are shifting base from China.
These hubs will produce equipment like silicon ingots and wafers, solar cells and modules, wind equipment and ancillary items like steel frames, inverters, batteries etc. Presently, about 85 per cent of solar cells and modules in India are imported.
(Hindu Business Line Article)

In their “Silk Road Briefing”, Dezan Shira & Associates conclude that “COVID-19 outbreak has dealt a blow to the global economy but as the situation stands, it seems like the course of economic recovery for India will be faster than several other advanced economies. India will also come out as a viable and dependable destination for foreign investors”. (Silk Road Briefing)

According to Guruprasad Mohapatra, Secretary in the Indian Department for Promotion of Industry and Internal Trade (DPIIT), "The world is rethinking its strategy of putting all eggs in one basket. A lot of interest is being shown by companies towards India".
Around 1,000 foreign companies are engaged in discussions at various levels with the Indian authorities. At least 300 of these companies are actively pursuing production plans in sectors such as mobiles, electronics, medical devices, textiles and synthetic fabric, according to Indian top government sources. (Business Today article)

5. Useful links

6. Dossier Coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

26 mei 2020