Why India Inc. Must Prepare for a Perfect Storm of Converging Crises

The Perfect Storm of Converging Crises: Covid 19, Depressed Economy, and Social Unrest

India is staring at a Perfect Storm of converging crises including a depressed economy that is further hit by the Coronavirus Shock, the Pandemic itself that needs management and handling, and social unrest stemming from ham handed handling of the pandemic as well as already existing communal tensions.

The convergence of these three crises means that India Inc. has to b ready and prepared for handling the aftermath of these crises.

For instance, the Covid 19 Pandemic and the subsequent lockdown of the economy means that Indian businesses have virtually come to a standstill and the freeze in economic activity might push many of them towards bankruptcy.

Already there is talk of millions of SMEs or Small and Medium enterprises shuttering and even the big businesses too might find it difficult to run their operations if the country remains locked down for a few more weeks.

This is the reason why the Second Phase of the Lockdown might see some relaxations for Industry and Agriculture as otherwise the economy would collapse.

Nevertheless, it would be prudent for India Inc. to prepare them for the Long Haul time frame.

The Corona Shock to an Already Depressed Economy Makes it a Double Whammy

Having said that, the Corona Shock is not the only factor that has struck the Indian Economy.

Already the Indian Economy was in the midst of a Severe and Historical Downturn that has been exacerbated by the Covid 19 pandemic.

Thus, it is like a Double Whammy as far as India Inc. is concerned and a shock from which the country would take a long time to recover.

These calls for adequate preparation from the Indian businesses and some measures that can help them include dipping into their cash reserves in the same manner in which households usually turn to their Gold and Silver articles to sell when they are facing a Financial Crisis.

Indeed, some experts believe that the Indian Economy might have a Repeat of 1991 when India approached the IMF or the International Monetary Fund for assistance to tide over the Balance of Payments problem.

Of course, the situation might be not that dire now as India has built up a War Chest of Billions of Dollars of so-called Hard Currency to withstand the economic shocks.

However, India Inc. needs to plan for all eventualities and it makes sense if they hoard their Dollar Holding as well.

A Triple Whammy to Exporters and the Chinese Threat Due to Imports

Talking about Dollars, the Indian Exporters are sure to face a Triple Whammy as not only the economy and the societal situation becomes grim, but also global headwinds in terms of a slowing world economy means that exports might not find takers.

Indeed, the West is in the grip of a Historic Recessionary Cycle and this means that Indian Exporters would find no market for their goods.

Having said that, the India Inc. must also be wary of the Chinese imports that can strangle the already suffering SMEs.

To explain, as SMEs find it difficult to produce goods, consumers might turn to Chinese alternatives to fill the demand and this has the potential to damage the Indian economy more.

In addition, the IT (Information Technology) and Services firms are already warning of Dire Days ahead and hence, this would mean that the Indian Economy would face further challenges.

Therefore, it is inevitable that the Perfect Storm of Converging Crises calls for Astute Management.

Some measures can include retaining staff on the payroll without actually paying salaries and cutting down on all non essential expenditure.

Further, they can also use the cash and the profits made in the last few quarters.

The Indian Government Must Be Big, Bold, and Radical

Having said that, there is a clear case for India Inc, to lobby the government for a Giant Stimulus Package.

Such packages can take the form of Fiscal and Monetary aspects as well as Direct and Indirect Boosters to the Economy.

For instance, the Government can defer the Tax Payments as well as the GST (Goods and Services Tax) payments that it has done already on a smaller scale. Next, the Government can cut duties and taxes on exports and imports further.

Moreover, the government can roll out a financial package that gives out loans to the SMEs and Bails out the corporations.

In addition, the government can cut Income Tax and Corporate Tax as well as lower the Lending and Interest Rates.

What this means is that the Indian Government has to spend as Hell to manage the fallout from the crisis.

The government can finance this spending by Printing Money or Doing Whatever It Takes.

This is the Template that is being followed in the West and there is no reason why the Indian Government should not follow suit.

Just that they have to loosen the purse strings more and ensure that the broader economy benefits through this.

Conclusion

Last, some economists are already calling this Convergence of Crises as a Once in a Century Occurrence.

Therefore, it us our point that the preparation and response to them must be radical and not bound by History or Constrained by Shorter Term considerations.

Both India Inc. and the Indian Government must Think Big, Think Boldly, and Venture into the Unknown.

After all, we have not faced such a Monumental Challenge Before and hence, there is no reason why we must not take risks.

To conclude, India Inc. is likely to severely tested and hence, forewarned is forearmed to prepare accordingly.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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