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COVID-19's Dire Impact on Indian Businesses



India has been one of the countries hit hardest by COVID-19. In response to rising cases, the government imposed tight restrictions in March, and while some of these restrictions were lifted in May, cases continue to rise and there is much uncertainty about what the coming months will hold. This uncertainty, coupled with pre-COVID economic concerns, led experts to believe that COVID-19’s impact will be dire and long-lasting for Indian businesses.


Disruptions to Indian Businesses

Much like the rest of the world, stringent lockdowns in India led to reduced domestic demand and increased unemployment. These restrictions had a particularly strong impact on the millions of daily wage earners and migrant workers that are a substantial part of the country’s labor force.

Adding to these domestic disruptions were Chinese supply chain disruptions. After Chinese plants shut down in early 2020, Indian businesses that relied on a Chinese supply chain experienced slowdowns and disruptions. Import-reliant industries such as pharmaceuticals, electronics manufacturing, and durable goods were particularly impacted by this.

Further adding to India’s economic stress is a slow-down in exports are the key export markets of China and the United States, which are both experiencing slowing economies. Obviously, it’s unclear how long recessions will last for these markets, but the slowing economies in China and the United States will continue to impact India’s export industries and the overall economy.

Responding to the COVID Crisis

The Indian government, like others, created a stimulus package to try to bolster the economy amidst the COVID crisis. However, the package, valued at around $266 billion USD, does not appear to be enough to compensate for the economic impacts of the last few months. While the stimulus package includes tax breaks and manufacturing incentives, experts believe that it will not be effective in part due to limited government spending and the fact that many benefits will not be seen in the short-term.

In addition to concerns about the stimulus package, analysts look to pre-COVID weaknesses in the country’s financial sector and widespread corporate debt as indicators that the economy will not quickly recover.

Results

Experts anticipate that India’s GDP will shrink by 3% and that business failures will be up by more than 30% over last year. Further, it’s predicted that as investments and industrial production continue to go down, there will be a 10% or more decrease in exports. Widespread decreases in production and increases in business insolvency are expected, and currently, the food industry is the only sector with an encouraging outlook.

With the volatility and uncertainty that Indian businesses are experiencing, all companies that do business in India should be vigilant in the coming months. It’s a good idea to thoroughly check in on how businesses you work with are fairing, taking any precautions to minimize risks and disruptions.

For questions about how your company might be affected or for advice about proactive steps to minimize supply chain risks, contact our global team of logistics experts today!

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