(Editor's note: This is the third and final part of a series that explores the future of industries in Kerala after lockdown imposed in the wake of Covid-19 pandemic. Read the first part on film industry & second part on tourism.)
Covid-19 pandemic has brought economic activities in Kerala to a near-grinding halt.
Sale of non-essential consumer goods has halted, foreign remittances have dried up and state's revenue too has dropped significantly, giving a huge body blow to the state's aspirations to make up for the losses incurred in the two back-to-back floods. Despite the natural calamities, the state had registered a modest growth in Gross State Domestic Product (GSDP) - from 7.3 per cent to 7.5 per cent - in the last financial year.
This time the crisis is much worse and the state needs huge influx of funds to tide over the crisis.
Kerala's Planning Commission has estimated that the lockdown has cost the state over Rs 80,000 crore from March 25 to May 3. Almost a quarter of these losses (approximately Rs 17,000 crore) may be attributed to the shortfalls in Gross Value Added (GVA) from trade, hotels and restaurants.
Closed shops, zero revenue
Trading, repair, hotels and restaurants contribute 17.5 per cent of the Gross Value Added (GVA) and employ 17.7 per cent of the labour force – second only to financial, real estate and professional services – in the state.
With only essential commodities being sold during the lockdown that began on March 24, traders have been struggling to meet their costs.
“White goods have taken a beating this period. We have lost at least Rs 100- 150 crore. The industry must have lost at least Rs 1,000 crore,” V A Ajmal, Managing Director of the Bismi Group told Onmanorama.
“Fortunately, our stores were kept open for the sale of essential grocery commodities,” Ajmal said.
But even the sale of essential commodities suffered a dip amid the COVID-19 pandemic. “With incomes slashed, consumers have steered clear from high-end food products,” he said.
No dip in costs
While traders struggled to keep their income, their costs, such as employee salaries, rent and fixed electricity charges, remained almost constant, but the only saving grace was rent waiver from a few land owners.
Keeping in view the long term effects of the COVID-19 pandemic, many firms have resorted to salary cuts and lay-offs to stay afloat.
“In March, our revenue dipped by 30 per cent. April was a complete wash out. We could pay our employees half the salary,” S Muralidharan, Director, QRS Retail Ltd told Onmanorama.
The relaxation for electrical and electrical repair shops on Sundays were the only relief for businesses during these months, he said.
Some firms have opted for innovations such as a minimum days employment to sustain themselves. “Every employee works for at least 10 to 12 days and they are paid for the working days,” Ajmal said. This ensured social distancing and helped employees earn money for sustenance.
The fixed electricity charges remain another concern commonly cited by the business community.
“We had to pay approximately Rs 9 lakh towards electricity bills during these months, despite minimal power consumption,” Ajmal said.
He said medium and small scale enterprises would get a huge relief if the government waived this amount.
Loan repayment worry
Another major worry of traders are loan and interest repayment. “Loan waiver is an unreasonable demand. Burdening banks that are the back bone of our financial system is not wise in the current circumstances. Interest reduction and instalment payment of interest will help traders get back on track,” Ajmal said.
Many traders fear that moratorium on loans will only hit the pause button to an impending disaster. Since the borrowers have to pay an accumulated interest for the duration when the moratorium ends, it could prove to be a huge financial burden to small and medium enterprises. The businesses will need several months to bounce back to normalcy.
Some suggested that long term loans and disposable funds to needy firms after a social impact assessment will help entrepreneurs. “Businesses need at least an 18-month window to bounce back to normalcy,” said Prem Sunny, Director of Operations at Sunny Diamonds.
Low consumer demand
Depressed consumer demand remains another key issue traders have to tackle with after lockdown. “Consumers would not rush to a store and buy non-essential items immediately after lockdown. They would be cautious while spending from their already slim wallets,” Muralidharan said, and added that the consumer sentiments would be revived by the year-end.
Spending would directly depend on how the COVID-19 pandemic is contained in an area. “Our Malabar branches were the most affected because of the increase in the number of positive cases,” Ajmal said.
A high cash flow in the economy is key in restoring consumer confidence. Putting more disposable income in the hands of the consumer at the right time is crucial.
"This push factor is the key here," Prem Sunny adds.
Changing times
Most traders, however, have adapted to the changing times with surprising speed and alacrity. They are actively engaging with consumers through the only avenue available- digital platforms.
Traders of fast moving consumer goods (FMCG) and consumer durables vouch for the fact that sales through digital platforms have shot up manifold in the past two months.
With e-commerce firms like Amazon and Flipkart out of the picture during the lockdown, small and medium firms have stepped up their game in online marketing and sales.
For essential commodities, most customers prefer online shopping with home delivery to traditional shopping, Ajmal said.
He added that his group has ramped up tele-shopping and social media shopping facilities significantly during the lockdown period.
Meanwhile, industries have modified their working styles significantly. Besides bringing all employees on a common platform, work-from-home options also proved useful in cutting travel costs.
“We never considered work-from-home as a viable option in our industry before lockdown. But it has worked out surprisingly well for us,” Prem Sunny said.
Way Ahead
The traders do not know how the markets will perform after the lockdown. Industry leaders have also raised multiple demands ranging from loan and interest waivers to social impact funds to help suffering firms.
For many traders, marketing products to induce consumer buying is not on the charts, given the huge dip in their revenues. A select few may, however, take advantage of the lower advertisement costs.
The revival of the economy will depend primarily on boosting consumer demand. If the demand fails to pick up, the losses will mount and lead to default of loans aggravating the crisis.
The financial packages announced by the centre and state promise more liquidity and credit. However, the key lies in ensuring that the targetted groups benefit from the package and the timely circulation of money in the economy.
Even entrepreneurs vouch for the fact that only a demand side boost can revive the economy. Disposable income in the hands of the 1.3 billion Indians alone will get the cogs of a post-pandemic economy moving.
