This article is written by Sushmita Choudhary, a student pursuing BBA LL.B from New Law College, Bharati Vidyapeeth Deemed University. It talks about how technology will affect the economy in the current COVID-19 crisis.
Table of Contents
Work and life will not be the same after a long time following the lockdown. The world will see major social, behavioural, and economic changes. Amidst all this, what appears is that technology will be playing a key role in various fields, in the public and private sector as well. Firms that usually provide technology-based services in various fields, like healthcare, climate change and many others, can become crucial problem-solvers in the present time of crisis.
The report from the World Economic Forum had shown that the future jobs were set to grow by 51% in up to 2020 but these numbers would hold no good following COVID-19. Technological progress is important for economic growth and can give a boost to the efforts towards economic improvement. Investments in technology at this point in time and also in future can increase the overall profits and output rate efficiency of a business. It will increase the division of labour and job specialisation.
After the Coronavirus crisis, the world would witness an increased usage of virtual technology for meetings, considerable investment in science and medicine, application of AI, a surge in e-learning, extensive use of telemedicine and reduction in overheads, comprising lower rents and travel costs.
Work from home and online meetings will eventually become part of routine work culture. The government would want to implement digitization and automation in most areas including administration of its social sector programmes across health, education, social work, public employment, public distribution, etc. besides its regular operations. A reduction in field visits and less human interaction will be witnessed. Collaborative efforts taken by industry and other stakeholders to make a future-oriented workforce strategy will play a crucial role. A preliminary assessment done by the International Labour Organization suggests that approximately 25 million jobs could be lost due to the COVID-19 crisis. If the virus still prolongs, the numbers would be much elevated, as is already seen in different parts of the world. So, in a time like this, all key stakeholders should put their heads together to mitigate the economic impact of Coronavirus. Technology will be at the core of these strategies, especially in fields like healthcare and education.
From India’s perspective
Indian economy, like all around the globe, is suffering due to the Coronavirus pandemic which is said to be the trigger for the worst recession seen since the Great Depression during the 1930s. India’s economic growth forecast has been cut down drastically by the IMF (International Monetary Fund) for the current fiscal at 1.9%. It predicts a revival in the economy by the next fiscal anyway. The government has already begun relaxing the strict lockdown restrictions for an eventual revival of some commercial activity especially in the rural sector and farming-which potentially allows for the resumption of 60% of the economy. However, the output for the year which started on April 1, is likely to shrink by 0.4% compared with the growth of 4.6% the previous year. According to LiveMint report citing estimates from the National Sample Survey and Periodic Labour Force Surveys, the loss of jobs could extend to 40 million before the end of the year and also, there are concerns over labour shortages. Several sectors including manufacturing, trade, transport, tourism, education, healthcare have been hit severely.
The national lockdown which has induced a low contact economy has considerably prioritized new digital ecosystems and business models within days and weeks. New models are being adopted which are visible in various sectors like healthcare, merchandise and agriculture. Government portals are going digital which will further open up the job market. The government, for instance, is currently establishing ways for making it easier to include rural and tribal products in e-commerce platforms. It is creating digital platforms for teleconsultation for patients to boost the Indian healthcare sector.
Will going digital help minimise the hit to the Indian economy
The answer is yes. Almost all sectors have the capability to get tech-based. Firms that will be digitised will be operating in a market of an estimated 700 million smartphone users and 800 million internet users by 2023. If that happens, a vast economic value will be added. By going digital, the nine core sectors will be doubled by 2025.
Going digital will double the economic value of the nine core sectors including coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, electricity and aluminium by 2025. The given core sectors single-handedly have the probability of contributing up to $150 billion in economic value. Moreover, if non-core sectors (i.e. retail)go digital, they can not just increase the GDP but also create considerable employment and skills development opportunities throughout the country as we have seen above how Amazon has been getting profit over increased shopping of online grocery and other essentials. With trans-sector digitisation, digitisation in India can consider potential value adds; for instance, $130 billion for the electronics manufacturing sector, $250 billion for IT-BPM sector and an approximate total of up to $435 billion by 2025. That would constitute up to 10 per cent of India’s GDP.
Additionally, going digital calls for policy adaptations. For instance, new digital platforms will eventually require more ease and redefined rules in things like founding start-ups and hiring digital age employees. More women will set foot in the workforce; especially, those who currently find it difficult to work due to logistical, safety or other issues.
Citizens need to accept the idea of a digital economy. Going ‘COVIDigital’ is the new normal. The time to act is now. Youth have the opportunity to take charge of the discourse for innovation and using technology for solutions. Undoubtedly, the COVID-19 pandemic has shaken India along with its economy heavily. We are still in lockdown. However, if optimistically looked upon, in an adverse situation always comes opportunities. Turning ‘COVIDigital’ will not only remarkably escalate the immediate economy but also lay the path for a smart, tech-enabled and solution-based prolonged growth.
Around the world
While the rest of the economy is failing miserably from the paralyzing impact of the coronavirus, business at the biggest tech companies is holding firm — even thriving.
As per a report from The New York Times, Amazon revealed it was hiring 100,000 warehouse workers to fulfil the increasing demand and Mark Zuckerberg, CEO of Facebook, noted the market for video calling as well as messaging has exploded. Also, according to the report, Microsoft observed that the figures using its software for online collaboration had climbed almost 40 per cent in a week.
With people following advisories of working from home and maintaining social distancing, COVID-19 has escalated reliance on services from the technology industry’s biggest companies while stimulating trends that were already making them advantaged.
Amazon has distressed the brick-and-mortar retailers for years. Apart from that, shoppers are now more unwilling than ever to go to the store and are thus turning to the e-commerce giant for obtaining a vaster variety of goods, such as groceries and over-the-counter drugs.
Online streaming and easily attainable services like Netflix have dulled box office sales for movies in current years. Presently, as movie theatres are closed under government orders, Netflix and YouTube are getting a new audience and booming like never before.
Already companies were discarding their own data centres and shifting to Amazon, Microsoft and Google for computing services, maintenance of data and servers, etc. That shift is likely to accelerate as millions of employees are supposed to work from home now in the pandemic, generating pressure on corporate technology infrastructures.
Apple, which once was thought to be among the American companies very prone to risk from the coronavirus because of its reliance on Chinese factories and consumers(China being the first country affected by it), appears to be in a stable position.
Talking to CNBC, Daniel Ives, managing director of equity research at Wedbush Securities Inc. affirmed the largest tech companies could emerge on the other side of this much stronger.
That does not mean that major technology companies shouldn’t be worried. The most indispensable factor for the success of Google and Facebook being advertisements tends to suffer during economic downturns. The stocks of Apple, Microsoft, Amazon, Facebook and Alphabet, have jointly faced a loss of over $1 trillion in market value from some months ago when U.S. stocks traded at record highs. Microsoft and Apple have cut their short-term financial forecasts because the consumers have slowed down their spending.
Tools for communication like the videoconferencing service Zoom are important and need of the hour, but firms providing ride-hailing services like Uber and Lyft and online holiday rental sites like Airbnb are witnessing customers vanish in America and around the world. The co-founder of Airbnb even told CNBC, ‘travel as we knew, it is over’.
According to Frank Gens, chief analyst at IDC, the $3.9 trillion global technology industry will surely suffer this year, though just how much remains unknown. In December, the research firm IDC (International Data Corporation) forecast the worldwide growth for sales of hardware, software and services in the current year to be 5 per cent. Some months ago, after it became clear that the coronavirus would hamper supplies and slash sales in China, IDC predicted the annual revenue to inch ahead at only 1 per cent.
However, when the economy will eventually improve, Big Tech composed of Apple, Microsoft, Google, Alphabet and Windows could benefit from the big shift in consumer habits. Also, despite facing over 18 months of criticism from various lawmakers, regulators and competitors around the world before the pandemic hit the United States, the biggest companies are likely to finish the year dynamically.
While Amazon has pretty much-changed shopping habits for items like books, gaining the trust of customers for groceries has proved to be a tad challenging. Now, with more people being forced to stay home due to government advisories, one of the last towers of physical retailing may be facing trouble.
Michael Crowe of Charlotte, a customer from North Carolina, ordered groceries from Amazon for the first time a few months ago because he didn’t want to risk going to a supermarket.
Another Mr Crowe, 36 who works for the home improvement retailer Lowe’s said that he could see himself doing that in the long term when the pandemic will be over.
Guru Hariharan, the founder of CommerceIQ (a company which provides automation software services to major brands like Kellogg’s and Kimberly-Clark) claims that with more customers trying different Amazon services, there may be created permanent shifts in buying habits. He also states that one of the reasons for Amazon’s increase in demand is that shoppers are buying more categories of goods which they may need. He informed that between February 20 and March 15, sales of over-the-counter drugs have risen ninefold on Amazon in the United States compared to a year ago and going by the same comparison, dog food orders have increased thirteen-fold, and paper towels and toilet paper sales have tripled.
In a blog post of March 16, 2020, Dave Clark, Amazon’s senior vice president of worldwide operations, wrote about hiring new employees for its U.S. warehouses and delivery networks because their labour needs are unpredictable for this year.
Mandatory stay-at-home orders by the government to stop the spread of coronavirus are exceptionally increasing traffic to video streaming platforms and social media.
According to Sensor Tower, a mobile app data company, downloads of Netflix’s app jumped 66% in Italy, 35% in Spain and in America, 9%, where Netflix was already prevalent, during the lockdown. Netflix did not choose to comment on whether it was witnessing a rise in subscribers.
Government officials in Europe called Reed Hastings, CEO of Netflix to ask if Netflix could reduce the video quality of its streams so as to ease the strain on their internet network.
The company agreed to do it for 30 days. YouTube also agreed to suspend streaming of high-definition video in Europe for a month.
Earlier vs Now
In this section, we are going to see some changes that the COVID-19 has made in general:
Remote work vs in-person meetings
Tech firms from all around the world have the work-from-home option for all its employees. The companies that were earlier reluctant to provide an option of distant work have shifted to work from home. The demand for technology that enables virtual group meetings has spiked like never before. As a result, tools such as Zoom and Slack are witnessing ever-increasing numbers of users now. The real-world gathering has turned into reel world gathering.
E-commerce vs retail
With people following the self-isolation and social distancing advisories, online retailers have witnessed a surge in orders placed. Basic products like groceries and medical supplies have increased demand and they are even going out of stock on Amazon. Small shops and retails are still suffering. The supply chains are getting disrupted and have become a matter of concern.
Internet television vs cinemas
Demand for e-streaming has been soaring as people are not stepping out of their homes. Cinema Halls are shut indefinitely, resulting in a higher demand to watch movies at home. The increasing demand for online entertainment will have a great impact on traditional cinemas.
Home workouts vs gyms
Gyms across the country have shut down for an indefinite period. As a result, fitness enthusiasts are turning to online tutorials and home workouts which are convenient enough. There is an increased demand for stationary exercise bikes and memberships to online workout sessions.
Technologies are playing a very important role during the COVID-19 pandemic by keeping our society functional in the time of lockdowns and quarantines. And it is certain that technology may have a long-lasting impact even after COVID-19. Everything turning digital has demonstrated how ready we must be with technology to carry on life and business as usual.
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