The world is grappling with the spread of coronavirus (COVID-19). The World Health Organisation (WHO) has declared COVID-19 impact as an international emergency on 30th January 2020.
While the future is uncertain, countries facing the risk will likely see continued case growth; new complexes may also emerge.
Though China will recover first, the impact globally will be much longer. COVID-19 according to WHO, has spread to 83 more countries apart from China alarming public health authorities across the world.
Globally 105,586 cases are confirmed as of 9th March 2020.
As COVID-19 is turning from an epidemic to a pandemic, India needs to brace itself for the economic impact and recovery. In what follows we provide insights and best practices on how business leaders can traverse this uncertain and fast-changing situation.
As per McKinsey’s report, “Lower demand could slow growth of the global economy between 1.8 percent and 2.2 percent instead of the 2.5 percent envisioned at the start of the year.”
What Coronavirus Could Mean for the Indian Economy:
COVID-19 impact on business growth
The world is far more dependent on China with 16% of world GDP coming from there. OECD said China plays a greater role in global output, trade, tourism, and commodity markets thus magnifying the economic spillovers to other countries. Moody slashed its global growth projection to 2.4% for 2020 and projected India’s growth rate at 5.4% compared to an earlier estimate of 6.6%.
COVID-19 impact on the supply chain
India depends on China for its pharma, tourism, electronics, and furniture. COVID-19 has disrupted the supply chain and it is difficult to shift to other countries quickly.
COVID-19 impact on the fiscal deficit
Awareness of COVID-19, plus additional time to prepare, may help India manage its growth. However, India lacks a robust health system. India currently spends less than 1.4% of GDP on healthcare compared to the global average of 4%. The rise in public health expenditure would also put pressure on the fiscal deficit
Focus areas for Indian businesses
Following are the key action points that can assist businesses in India-
Use of Simulations to ensure Business continuity
Companies can use tabletop simulations to define and verify their activation protocols for different phases of response (contingency planning only, full-scale response, other). Planning along with investment will help sustain the impact. InCorp’s risk assurance team helps companies in BCP/DR planning.
Protect your employees
COVID-19 has been emotionally challenging for people. It is imperative for the leaders to recognize an action plan given its intensity and communicate to their peers about its frequency and specificity. Benchmarking of efforts is essential like curbing unnecessary travel, following frequent hand hygiene and respiratory hygiene, ensure the use of environmentally friendly disposable material to lower the transmission of the virus. In addition, minimize social and economic impact through multisectoral partnerships.
Ensure sufficient liquidity
Businesses should model their financials and maintain enough liquidity to weather the storm. Businesses should optimize their receivables and payables and make moves to stabilize the organization. Given the impact of the COVID-19 across the globe, our valuation service team provides what-if scenarios with a financial impact report, discusses the suitability of potential deals, fundraising and more.
Manage supply chain
Businesses should ensure resilience in their supply chain. The disruption in supply will likely see an unusual spike in demand due to hoarding. Businesses should optimize their network and also work on new suppliers for medium and long term stabilization. Our debt syndication service will help in minimizing the cost and achieve core competency in your business and provides recommendations in aligning the capacity to generate revenue.
The COVID-19 has not yet impacted India as adversely, but Indian companies need to protect its employees, work on the challenges and business risks and work towards containing the outbreak in whatever ways they can and simultaneously work on protecting the business.