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In this Q&A session, Koushan Das, Dezan Shira's Assistant Manager for Business Intelligence, discusses the economic impact of the Coronavirus and the steps taken by the Indian government to mitigate these.
The Covid-19 pandemic has hit the world at an unprecedent scale and speed. How has this outbreak impacted India?
Due to the outbreak of the coronavirus, growth forecast of countries around the world has been revised and unfortunately, the results show a bleak picture. It is estimated that the global economy may contract by 3.0 percent, while India may grow by 1.9 percent in 2020-21, which is still the highest growth rate among the G20 economies, according to the IMF.
The impact of the outbreak on India is increasing, although not at a frightening pace if we compare it with some of the most virus affected countries.
India is currently facing massive supply chain and operational challenges. The impact has been felt across various industries especially pharmaceuticals, auto components, and electronics, which are facing business disruption and price volatility issues. Sectors such as tourism, aviation, hospitality, and trade have also faced the brunt of the severe travel, assembly, and activity curbs imposed by the governments across the world. This is followed by a wider impact on other sectors as economic activity stalls.
Despite the setback, it is expected that India will rise as the fastest growing economy among the G20 countries, as per a report by EIU.
What are the various steps taken by the government to contain this outbreak? How helpful do you think these measures have been?
The government’s response to monitor and control the situation is noteworthy. Prevention measures taken by the government include travel restrictions, evacuation plans, prohibiting certain export items, the quick establishment of quarantine facilities, and active health laboratories across the country.
One of the government’s laudable steps was the announcement of a nationwide lockdown for 21 days and extending prohibitory measures by another 19 days. Other than a few essential services, all commercial, industrial, religious and cultural activity had been shut down. This is seen as the most extensive Covid-19 lockdown in the world and results in terms of slowing down of virus transmission are noteworthy.
What do you think are the possible effects of the lockdown imposed by government in India?
The lockdown in India will have continuing and serious effects. The degree of severity of the impact varies across all the sectors of the Indian economy. Among others, the services sector, especially segments such as retail, aviation, and entertainment, have been directly hit. Labor and supply chain disruptions, production shutdowns, especially for companies exposed to international trade, have raised serious concerns for many businesses.
There has been a decline in consumption level due to the reduction of incomes. Indian economy is facing a slowdown and GDP may fall further if the lockdown is extended.
What advise do you have for the companies and businesses operating in India? How can they navigate through this crisis? What are the government plans to provide relief measures to these companies?
Companies should engage in sound business contingency planning, identify revenue and operational impact on supply chains, and review the impact of force majeure while preparing for potential claims in the next few months. This can help businesses mitigate the effect of this crisis.
To assist our clients during this crisis, our firm has launched a vCFO (virtual CFO) service to provide companies with financial expertise; and vCIO (Virtual CIO) to help you achieve your objectives in the information and technology arena.
The government has also annouced measures to combat the economic impact of the pandemic:
- Deadline for various compliances like filing income tax returns for FY18-19, goods and services tax (GST) returns for March, April, May, and composition returns, among others, has been extended to June 30, 2020
- Newly incorporated companies will get an additional six months to file declaration for the commencement of business;
- Mandatory requirement of holding board meetings has been relaxed by a period of 60 days for the next two quarters;
- If a company director is unable to comply with the minimum residency requirement of 182 days in India, it will not be treated as a violation.
These are some of the measures provided by the government for companies in India.
To know more about the Finance Ministry's announcements for various stakeholders, you can read our India Briefing article here.
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