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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. Today, nearly 8 months since India implemented the nationwide lockdown there have been recorded 7,550,273 confirmed COVID-19 cases including 114,610 deaths. However it has an optimistic recovery rate of 87%.

The 4 states with the most number of confirmed cases are Maharashtra (1,595,381), Andhra Pradesh (783,132) Karnataka (765,586) & Tamil Nadu (687,400). As the country is opening up in a phased manner beginning June 2020, certain zones still remain in lockdown. The most recent official number of cases in India can be found on the Government of India – Covid19 website which also gives the detailed state wise figures. 

2. Preventive measures

The national directives for COVID -19 management continue to follow throughout the country. Compulsory mask, minimum 6 feet distance in public places, fine for spitting in public places and frequent sanitization are a must. Companies must ensure their employees continue to work from home as far as possible

India was in a nationwide lockdown (Lockdown 1.0 till Lockdown 4.0) from March 25th until May 31st.

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. Unfortunately the outbreak still didn’t reach its peak while due to mainly economic reasons, the exit strategy started in June.

3. Exit strategy

India is now into the Unlock Phase-5 of the COVID-19 crisis which kicked off on October 1, 2020. See link for latest unlock highlights:  https://covidindia.org/current-rules-and-regulations/

Under Unlock 5.0 guidelines, the ban on scheduled international commercial flights has been extended until 31 October 2020. However, India has established air bubble arrangements with 17 countries. Airlines from both countries under an air bubble arrangement fly between the two jurisdictions carrying passengers from either point. See list of countries here - https://www.civilaviation.gov.in/en/about-air-transport-bubbles

Inter-state travel without restrictions has been permitted and remains in effect. The Indian Railways have restarted passenger trains with a limited number of trains, and gradually adding more trains to cater to rising demands due to the upcoming festive season. For the latest travel advisory by the Indian Ministry of Health and Family Welfare, see https://www.mohfw.gov.in/ under travel advisories.

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. The hardest-hit due to the ensuing lockdown have been the MSMEs suddenly under tremendous stress from working capital, labour and logistics issues among others. With more than 60 per cent economic activities shut down for the initial 8 weeks, as 1.3 billion people were placed under lockdown for, 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.

The lockdown came at a time when India’s economy was already struggling with trade across sectors being impacted by the 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. The Indian economy contracted by a record 23.9 per cent in the April-June quarter and is forecast to contract by 10.3 per cent in the full year (source IMF)

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

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c. Measures for Economic Relaunch

The government continues to take proactive steps to drive growth in post-COVID World and has laid out certain policy reforms and has announced incentives for businesses. The most recent one being announced on 12 October 2020 with a view to stimulate consumer spending and capital expenditure

Other measures & incentives to support business (and individuals) post covid:

  • Introduction of a contactless process in customs (July 2020) to ease export, import process and enhance the in-house testing capability. The Customs Department is supposed to roll out a pan-India faceless assessment for all imported goods, in all ports across India by December 31.
  • The extension of the existing Foreign Trade Policy 2015-20, to March 2021 including extending the validity of Duty Free Import Authorization (DFIA) and Export Promotion Capital Goods (EPCG) authorizations for import purposes.
  • €3.9 billion has been earmarked for incentives to companies setting up advanced battery manufacturing facilities. This being in line with the government’s goal of having  30 per cent EVs by 2030 as Indians have realized the advantages of going electric – increased energy security, improved fuel economy, lower fuel costs, and drop in emissions.
  • Announcement of the Agriculture Infrastructure Fund of about €12 billion creating a huge opportunity to invest in post-harvest management solutions like warehousing, cold chain, and food processing

May 2020, saw the announcement of the 241 Billion Euro – equivalent to 10% of the country’s GDP – economic stimulus package with a focus on strengthening the “India opportunity”, by becoming ‘Self Reliant (Aatma Nirbhar)’. A culmination of several factors that reflect the economic and political challenges faced by the country it is aimed at rebuilding the economy through fiscal & monetary support, ease of doing business processes, as well as some fundamental reforms. The stimulus package is intended to boost local manufacturing, and help improve India’s competitiveness in a global economy. Overview of this Mega Economic Package can be found in the Summary of announcements: Aatma Nirbhar Bharat Abhiyaan

Prior to this and an immediate fall out of the Coronavirus lockdown, India had announced an economic stimulus package worth €19.13 billion to ensure the most vulnerable segments were not left untended. The package was disbursed through food security measures for poor households and through direct cash transfers.  Beneficiaries were the Daily wage earners, small business owners, and low-income households the ones said to be most vulnerable during the lockdown.

The Reserve Bank of India (RBI) made announcements on 22nd May 2020 on its monetary policies and as a support to the COVID affected economy which were later extended till August 31, 2020 with the latest update made on 9 October 2020 The details of the policy changes can be found on the RBI website – links mentioned below:

Governor’s Statement - October 9, 2020 & the initial Monetary Policy Statement, May 2020

Other important links: 

d. Economic Outlook

The Indian economy was showing signs of a slowdown before Covid 19 hit its shore but GDP growth at -23.9% in Q1 was the first such contraction India witnessed in more than 40 years.

According to the International Monetary Fund (IMF), the Indian economy is expected to shrink by 10.3% in 2020 which is a downgrade of -5.8 percentage points from their June projection for the country. However, the IMF expects India to rebound in 2021 with 8.8% growth - an upgrade of 2.8 percentage points relative to the June update.

While the annual economic growth rate would continue to be in the negative territory, reports suggest that the Indian economy has passed its worst phase and is on the path to recovery: Passenger vehicle sales in India increased by ~26%, to reach 272,027 units in September, against 215,124 units in the same month last year (Society of Indian Automobile Manufacturers - SIAM). Railway freight earnings increased by 11% (on Y-o-Y basis), at 43.46 MT as of October 13, 2020, indicating a gradual recovery in demand and an uptick in economic activity. And, with the upcoming festive season, the E-tailers are expected to witness a collective sale of ~US$ 6.5 billion in the next 4 weeks.

Exports a key component of the Indian Economy recovered to pre lockdown level narrowing India’s trade deficit from USD 6.8 billion in August 2020 to USD 2.7 billion in September 2020.

Source:

Centre for Monitoring Indian Economy

India Brand Equity Foundation

IMF – World Economic Outlook 

Source: IMF

e. Trends

Considering India implemented one of the harshest lockdowns, reviving the growth rate to pre-covid time will be a long road ahead. The gap created in demand and supply will take a considerable amount of time to return to normalcy as the impact of the pandemic has been disparate for each industry or sector.

Overall business sentiments, however, remain positive, with the Indian stock markets bouncing back to being ‘bullish’ in less than a quarter, backed by steady in-flows of FDI’s. SME’s and MSME’s are the worst affected, hard hit by liquidity crunch and therefore is expected to undergo restructuring and consolidation.

‘Pivot or perish’ is the new mantra. The pandemic has made businesses re-think their strategy and positioning. More and more companies are adopting lean strategy models. Decision making on expansion, internationalization, tie-ups and collaboration has slowed down considerably and stakeholders and being extremely cautious.

The focus on digitization is now of utmost importance for businesses across sectors irrespective of their size. Stakeholders and business owner now more so realize the value addition of incorporating digital platforms whether to support sales and marketing or to manage internal administrative affairs. Majority of Indian companies, especially the SME and MSME’s are now undergoing the digital transformation which was long overdue.  

Due to the global cues of China Exodus, the number of companies from across the globe are exploring India as one of the destinations for relocating their manufacturing base. Indian Government is also pitching to attract both large multinationals and international SME’s via this route.

f. Opportunities

Following sectors have evolved and have witnessed significant demand as a result of the pandemic.   

Healthcare & Wellness: As people adopt better personal hygiene practices in the post-COVID-19 world, the consumption of immunity-boosting and wellness products is expected to see a rise. At present, products like disinfectants and sanitizers are recording the highest sales – a trend that seems likely to continue and become deeply ingrained in consumer behaviour. Fitness products like fitness tracking gadgets and apps are also seeing a surge in demand.  Moreover, as people turn to the online medium, provisions like online medicine delivery and teleconsulting will rise even further in the future. 

Digital & Internet Economy: In the Asia Pacific region, India is amongst the top three digital adapters for hardware, along with Japan and China, with the over 560 million and rapidly growing Internet users in the country (about 50% of our population). During the course of the pandemic, people started using digital medium for work, education, entertainment, shopping, and payments. Online platforms for work meetings has seen a massive rise in popularity. Meeting and Video calling Applications have come up with innovative features making it conducive for professionals to work from home. Some of the sectors that have witnessed exponential growth due to Covid are ed-tech, OTT platforms, fintech, remote working tools, e-commerce & delivery based services, and cybersecurity.

Automation: While automation technologies have been around for some time, deployed at various levels like chatbots, automated tele-calling, voice assistants, or the industrialized robotics but In the COVID-19 environment, where contactless interaction has been the top priority, automation technologies have found a much faster adoption rate than ever.

Speciality Chemicals: Increased need for cleansing and sanitation has catapulted the demand for hand sanitizers, disinfectants, and surface cleaners. India’s largest fast-moving consumer goods (FMCG) companies have rolled out a range of home cleaning, disinfectants, and personal hygiene products as they anticipate a surge in demand for such items amid the COVID-19 crisis.  Also, the increased demand for the disinfectants, drugs, and medicines due to the pandemic, has given an opportunity to the organizations manufacturing chemicals required for manufacturing these. Hence organizations dealing in chemicals are expected to see a spike in demand owing to increased demand for disinfectants, drugs, and medicines by the customers.

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.

22 oktober 2020