This article is written by Ilashri Gaur, a law student pursuing B.A LLB (Hons.) from Teerthanker Mahaveer University. This article tells about the crisis which the industries are facing.
At the beginning of 2020, we all are facing a pandemic situation. It is now clear that the coronavirus will not just have huge costs in terms of loss of lives and public health, but lead to huge economic suffering.
The novel coronavirus pandemic has stopped the economic activity, threatening to push the world into a recession and because of which most sectors are facing the impact.
The virus which has so far infected and killed a lot of people in India due to which the government has taken certain measures like sealing borders and restraining non-essential services, to stop the spread of the virus. This virus has affected both the demand and supply of the industries.
Industries least affected
But here are three sectors that have been remained safe from the effect of the virus yet:
As the number of cases of COVID-19 all over the world are increasing, the government authorities and various other organizations in India are urging its citizens to stay at home and apply the formulae of social distancing. During lockdown revenue of telecommunication rose as compared to the previous year. The growth rate for the first two months of 2020 was the highest in the last 12 months.
The ongoing nationwide lockdown has not affected the functioning of the telecom tower in India. Telecom services are free from any obligation under the Disaster Management Act, 2005 which allows them to carry out an operation during the lockdown. But if people are not allowed to move around, the situation will change.
In rural areas, towers and telecom infrastructure are supported by electricity. The total telecom workforce including customer care, network operation centre and critical functions are reporting for work, while others are working from home. Work from home and social distancing is expected to boost data usage in-home broadband and mobile space in India.
It is also facing a big problem, a recent Act by the Supreme Court asked the carriers to pay the interest and penalties on the pending statutory dues.
India committed to spend nearly Rs 10,000 crore to encourage companies to manufacture pharmaceutical ingredients after the coronavirus outbreak disrupted the supply chain. The impact of coronavirus on Indian pharma has so far been limited due to existing stock. India depends on China for its raw materials and to other countries also for the other materials.
The government has also issued guidelines for testing to be carried out in private labs. The benefits from COVID-19 testing is likely to be offset by a decline in day-to-day walk-in business as well as the loss of business-to-business volumes due to lower elective procedures.
The Insurance Regulatory Development Authority of India (IRDAI) has asked insurers to cover COVID-19 cases in their existing policies and ensure that they will fastly and efficiently attend to the coronavirus claims. Life insurers are selling more protection policies and there is less dependence on ULIP (unit-linked insurance plan).
The insurer is not recurrent as other financials. Even the general insurers are likely to have less impact from this pandemic. During this pandemic, there will be a benefit for health insurance as people will be more likely to buy these policies because of the current scenario. There’s a possibility of re-insurance also. Re-insurance is a form of insurance purchased by insurance companies in order to reduce risk.
Impact on various industries by COVID-19
- The nature of the disease is such that there is an inherent tension between conserving lives which involves a large number of lockdowns, restrictions on travelling and social distancing and economic activity which is based upon the supply chains, trade, demand and consumption. Governments across the world have interceded to minimize the distress.
- The welfare state is back. This is the most significant transformation in decades in global economic policymaking. The state should stick to its important function of the provision of basic public services and act as a regulator, and leave the rest to the market to determine. Now the government has to intervene in every element of the economy for all the poor, food and cash transfers to become a reality.
- Big shifts in the stock market where shares are bought and sold, can affect the investment. There is a fear among the investors because the coronavirus will destroy economic growth and the government may not be able to reduce the effect for the same.
- The travel industry has been badly damaged, due to the lockdown. The flights are cancelled and the business trips and tourist flights are also cancelled due to which a heavy loss has been suffered by the travelling agency.
- Even the factories in China are slowing down due to this pandemic situation. Shops and car dealerships have all fallen in demand.
- The oil prices had already been affected. Coronavirus has driven the price down.
Industries which are worst hit during the crisis
Those industries which are worst hitten by the pandemic are:
The coronavirus pandemic has had a very bad impact on the aviation industry. Airline industries have been rushing to keep up liquidity and reduce capital expenditure to stay the worst impact on the global aviation industry. Due to this pandemic, the flights of business trips and the tourist’s tickets were cancelled due to which a heavy loss has been faced by the travelling agency.
The government of India is planning to reduce the loss of the aviation industry. The finance minister is considering a proposal that includes the temporary suspension of the taxes levied on the sectors. Such a situation has arised that the Emirates airline is facing a major loss. This is the world’s busiest airport for international travel which depends heavily on tourism and aviation. And the other airport operators and their stakeholders are already working to modify their operations in order to accommodate a fall in demand and largely reduce traffic. If the situation does not improve then the aviation industry will be the hardest hit, seeing a loss of $27.8 billion revenue. There is a chance that many of the travel and tourism agencies will have gone into recession.
Vehicles are one of the best modes of transportation. But due to this pandemic, a situation has come where all transportation out of the city has shut down. No boat leaves, no planes take off and no buses are moving. As coronavirus continues to spread the government has restricted travel. Due to social distancing, the government stopped public transportation as there is a lot of risk of infection in trains and buses. The potential of risk depends on how crowded the train and buses are and it can vary in different parts of the country.
Public transport is the backbone of local and national economics services and is to be maintained as long as possible. The western railways have suffered a loss of around 178 crore. Railway has converted coaches into isolation wards; these coaches are equipped as per the medical advisory issued. Export and import transportation are fully closed. The trains are allowed only for a specific purpose. Due to this, India’s growth is estimated to decline below 5% in financial year 2020 from 6.1% in financial year 2019.
Most of the Indian construction industry imports at least some components of construction from China. The largest imports related to the construction industry are iron and steel products, technical construction, electronic equipment, plastic and fibre elements, solar panels, etc. Heavy reliance on China for iron and steel products is a cause of concern for the industry. Due to production in China falling, there is an increase in the prices due to the increase in the cost and the profit margin is reducing in construction in India. Because of this pandemic all the construction is blocked and the market for transportation and highways continues to flourish.
The stock market took a huge fall worldwide including in India. The Indian government has contacted various international governments for financial support to tackle the aftermath of this pandemic. Indian is less integrated with the Chinese supply as compared to other markets. The Sensex and Nifty also dropped. Economic imbalance which is caused by the virus leads to India’s fall and supply chain.
Global oil demand is expected to decline due to this pandemic. India, the world’s third-largest oil consumer is unable to take full advantage of global crude prices because of the downfall in the sale of petrol and diesel due to this lockdown. Sales of automobiles fuels have slumped by 80% in the cities and 60% in the rural area. Global energy transition is affecting the oil industry. Companies must balance the investment otherwise it will face a huge loss.
The coronavirus is affecting a huge range of energy markets including coal; gas and renewables but its impact on the oil market is serious. Russia and Saudi Arab are having conflicts related to the oil dealing. A major fall in the price of the oil the situation can arise that Saudi Arabia can go into recession due to this fall in the price of oil. Saudi Arab could never win a price war with Russia. Russia’s economy could live with an oil price of $25 a barrel for years compared with $91 for Saudi Arab according to the International Monetary Fund.
The president of the US has ordered his government to boost demand for US oil by adding off its oil reserve. Most estimates say the pandemic has reduced global oil demand by about 20 million barrels per day.
The oil market depends on the government as to how quickly the government takes such steps due to which we can overcome this outbreak. Small producers would close down and future investment would dry up prices.
There are different ways that technologies are also affected by this pandemic:
- This pandemic leads to full or partial control shutdowns of the factories and plants, some of them are used by the technology companies. For example, Apple experienced a shortage of its iPhone supply.
- Due to this pandemic, the most important tech conference was cancelled. Several companies reschedule the event which they had planned for MWC (mobile world congress).
- The outbreak of coronavirus has forced many big companies to work from home as this is the safest course of action during this pandemic. As these drawbacks become necessary to make clear for the enterprises to look for ways to smooth functioning for employees, one way will likely be virtual reality.
According to a survey, almost 49% of business respondents are looking to use virtual reality.
How the world recover from the loss after the pandemic?
The pandemic will change the world forever. The pandemic will strengthen the state and reinforce thinking of all peoples. All types of government will adopt all the necessary measures to manage the crises, and may well give up these new powers when the crisis is over. The thing which will not change is the fundamentally conflictive nature of world politics. The country all over the world will recover sooner or later but there will be a slow process in earning the profit and there will be more stability.
From this pandemic, we all know that every country is somehow interdependent on the other so to heal from this, every country has to work together to overcome such crises. More companies will demand to know more about their supply and will trade off efficiency for redundancy. The government will intercede and ask to consider strategic industries to have domestic backup plans and reserves. The profitability will fall but the stability will rise.
Due to this pandemic, a heavy loss is faced across many countries. As it causes a huge loss in different industries whether it is an aviation industry, transportation, infrastructure, stock market or oiling all are facing the aftermath of this pandemic. Even after the recovery from this virus, it will take time for the aviation industry to heal from the heavy losses which they are facing right now.
If the people follow the practice of social distancing then this pandemic can be finished soon so that the government again can focus on the financial and economic status of the country. Due to this pandemic, the private sector faced a huge loss and due to which there are chances that many people can lose their jobs.
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