As it stands at the time of writing this blog post, the government intends lift the lockdown on May 3, 2020. Assuming this happens in a phased manner, I strongly believe life will not be normal for a while, not until we get a COVID-19 vaccine.
Each of these businesses will impact the education industry. With each of these industries hurt, it will have a direct impact on IT sector (not covered in this article). Can the government do anything to save each of these industries?
- Restaurant, Take Away Industry
- Tourism Industry
- Wedding Industry
- Overseas Education Industry
- Auto Industry
- Entertainment Industry
- Real Estate Industry
- Retail Industry
- Religion Industry
- Phase 1: March 3 – April 14, 2020 (21 days)
- Phase 2: April 15 – May 3, 2020 (19 days)
- Phase 3: May 4 – May 17, 2020 (14 days)
- Phase 4: May 18 – May 31, 2020 (14 days)
- Total – 68 days (18.6% of the year 2020)
Restaurant, Take Away Industry
The annual turnover of the restaurant industry in India is about Rs 4 lakh crore ($52.6 billion). A whopping 7.3 million are employed by this industry, if you add the restaurants from the unorganized sector, it is bound to be far higher.
Sit down dining will drastically reduce. Star hotels may continue to have a business but not to the pre-lockdown levels in the near future.
In Bengaluru ‘Darshini’ restaurants are popular. People will go back to these idli-sambar restaurants because for many these restaurants was the primary source of inexpensive (and frankly – tastier) food.
Food delivery accounts for 30% of the revenues for restaurants. Food delivery could slowly limp back but people will be extremely guarded and cautious, one bad news of COVID-19 people will go back into their shells.
The slowdown in this sector will hurt other industries such as hospitality education, auto industry, commercial rentals.
Update: 40% of restaurants are staring at permanently shutting down. Only 25% of restaurant partners of Zomato & Swiggy were operational during the first two lockdowns in India, this led to a 70% drop in order volumes. Swiggy & Zomato had raised over $100 million each in Jan-Feb timeframe.
Many are of the view food-delivery business can revive the restaurant business. Doubt it. Delivery services (restaurant, e-commerce) alone cannot revive our economy.
The first sector which got hit due to the pandemic was the travel & tourism industry, not just in India but globally. The tourism industry includes hotels and restaurants, airlines, tour operators, transport providers.
In India, Tourism is the largest service industry with a contribution of 6.23% to the country’s GDP and 8.78% of the total employment of the nation. India attracts over 5 million foreign visitors and 560 million domestic visitors a year.
For the year 2020, the travel industry was expected to have revenues of $46 billion and grow to $488 billion in 2029. This is now a big question mark.
The CII (Confederation of Indian Industry) estimates a loss of a whopping Rs 5 lakh crore to the sector, which may result in 50 million jobs being lost.
Family vacations will take a back seat. I think many had an overdose of family bonding from March 24. Travelling by train, flight, buses, taxis just not recommended until things settle down, to be read as ‘vaccine ready state’, which most experts say is at least a year away from now. Group tours will take a long time to recover.
Students pursuing a degree in hospitality are really worried about their job prospects in the coming years. There will be an oversupply of fresh graduates when hospitality opens up. Corporate outings will take a back seat as they will be in a cash-saving mode and employee safety mode.
Opportunity: Possibly tourism to small places take off as they will not be crowded.
One of the most auspicious events for most families in India are weddings, a $50 billion industry. Caterers, wedding halls, decorators, gifting services are suddenly jobless. Smaller size, simple weddings will be the new fashion for at least a year.
The industry that was thought to be “recession free” is now very badly hit by the pandemic. Most of the weddings have either been cancelled or postponed to the end of the year or being scaled down to a massive extent.
The wedding industry is divided into various tiers which starts from high-end event planners, large inventory and manpower-based decor companies, catering companies, small to mid-level photography companies, jewellers, garment industry etc.
India’s gold consumption in 2020 could fall as much as 50% from a year ago to the lowest level in nearly three decades. This is not auspicious to the Wedding Industry that sees a significant gold purchase during wedding season.
These units give rise to one of the most massive day to day employment structure in the country. This industry is very labour intensive, the outbreak has caused a huge economic crisis creating unemployment of daily wage workers like decor labour, catering unit labour, flower sellers, cleaners, waste pickers etc. Most of them earn between Rs 500-800 per shift per day which is usually a 10-12 Hr shift.
On the top tier lies companies with a monthly payroll are event agencies, decor companies etc who many have some corpus available to sustain for a few months without weddings. Some of these companies need to do at least 100 weddings annually to sustain.
3Productions, a wedding planning agency had to say this,
Most weddings will move towards becoming a mid to small-scale affair. This, of course, will also depend on the governments regulation on mass gathering limits for the next year.
Families will opt to either host their weddings in their farmhouses if they have the luxury to do so or move it to open venues, lawn spaces etc and stay away from Air-conditioned banquets and halls for the next few months in 2020.
Sanitization will be the need of the day and one needs to come up with effective measures to sanitise the event venue, entry points and during the events.
Overseas Education Industry
Every year about 250,000 students go overseas for their education. Most students are postponing their studies abroad – either due to family pressure or the schools are opening only in 2021.
Indians spend over $8 billion per year on educating their children abroad. Students not going abroad will hurt the US, UK, Australia and in return, it may save a lot of foreign exchange for India.
Majority of students go abroad for their graduate (MS, PhD) studies. Most of them will postpone their academic year. However, undergraduate students are expected to pursue their studies abroad.
However, this postponement will hurt education consultants, SAT/GRE/GMAT/TOEFL exam preparing coaching classes, international flight sector. But this should not have a massive impact on our economy.
There is a lot of uncertainty for these students – classes being postponed, paying high tuition fee but attending online classes from India, jobs after graduating, getting work visas.
Opportunity: For education in India, online education ventures such as Byjus, Unacademy will benefit during these times. But not all families can afford to have a dedicated PC/laptop one per kid at home. For overseas education, if govt permits, a few foreign universities may fasten their plans to start their operations in India.
The student population in the world is about 1.5 billion. 70% of the students in India have access to smartphones but this gets complicated when the smartphone has to be shared amongst siblings.
The auto industry worldwide has been hurting, India is no different. The automobile industry in India was already slow since 2019, mainly due to the requirement of moving to Bharat Stage-VI emission norms from April 1, 2020.
Work From Home will have an impact on the auto industry. The fear of contracting Corona may force a few to venture out to buy a 2 wheeler or a lower priced 4 wheeler as they may not want to use public transportation.
Used car and bike sales are expected to rise. This segment will not help retain workers in automobile factories.
Over 5 million are employed in the auto manufacturing industry. 55% of this workforce is on contract who can be fired easily. Approximately, 2-3 million job losses expected in the auto sector.
Auto dealer showrooms, which employs about 4 million, have been cutting jobs for a year. The MSME sector which supplies auto parts will take a huge hit, banks will need to come up with new products tailored to tackle their cash flow issues.
Update: Bike (Bounce, Vogo) & self-drive car rental (Zoomcar, Drivezy) companies expect a 2-3x surge in business.
Malls are shut. Theatres are shut. People are getting accustomed to OTT – Prime, Hotstar (product not as good as Prime & Netflix), Netflix, Zee etc. With movies not being released in theatres, their main source of revenues will be from OTT which will not compensate for the loss from theatres. Many big-budget film releases have been postponed.
Daily serials have stopped airing fresh episodes as shootings have been stopped.
TV News channels have increased their viewership but we are going thru a Corona-fatigue. With many industries worried about cash flow, they are not spending on advertising.
With no fresh content on TV and theatres, Doordarshan has made the best use of this opportunity. Prasar Bharati has been airing old, rather very old successful serials like Mahabharat, Ramayan, Chanakya etc and it has been a massive hit.
Opportunity: There is an opportunity for entertainment on YouTube to pick up, but revenue will be a challenge.
Real Estate Industry
India’s real estate industry is pegged at $180 billion, it employs about 52 million people and it contributed 6% to India’s GDP in 2017.
During the lockdown majority of India saw for the first time how many migrant workers are employed by the real estate industry. Did we know 100 million migrant workers contribute 10% to India’s GDP?
The formalization in the real estate industry was done with the introduction of the GST and RERA Act. This hurt the real estate builders but these changes were very much necessary.
As mentioned in my other blog post, most commercial establishments are planning to relook at their rental costs.
- Property consultancy firm Anarock expects residential sales to dip by 35%, office space leasing to slide by 30% to 28 million sq ft in 2020 against 40 million sq ft in 2019.
- The demand for retail (shops, malls) space is expected to drop by 64% from 8.5 million sq ft to 3.1 million sq ft.
Co-working space was doing well in India. We need to wait and watch to see what happens to this segment.
The scene with residential real estate is no better. There was already an oversupply for residential apartments in most cities in India.
- Residential buyers want to postpone their purchase decisions in view of pay cuts, layoffs and an uncertain economic outlook (this is a global phenomenon, not India specific).
- Buyers are looking for discounts and better repayment terms and many prefer to buy properties that are ready to move in.
- Top 7 cities in India have 644,000 unsold residential units, of which 12% (worth Rs 65,950 crore) are ready to move in.
- The demand for apartments costing below Rs 40 lakh is expected to rise.
- The demand for low-cost housing will see a rise.
- Homes will be redesigned to accommodate Work From Home
Builders are being told my lenders to slash the price and sell apartments at whatever rate they can get.
The retail industry reached to Rs 66.39 lakh crore (US$ 950 billion) in 2018 at CAGR of 13 per cent and expected to reach Rs 76.87 lakh crore (US$ 1.1 trillion) by 2020 [source].
The retail sector employs 50 million people “directly”, according to the Retailers Association of India.
Mobile stores, grocery stores, shops in Malls, e-commerce fall in this category. The local Kirana store is one of the only ones standing tall during the lockdown in India.
The commercial real estate industry will take a beating as the demand from retail industry will shrink.
The market size of temple industry in India is $40 billion. The religion industry was seen always to be insulated from a recession, not anymore. The shops around a temple – flowers, eateries, hotels have shut as all religious places are shut due to lockdown.
About 60% travel for explicitly religious and pilgrimage purposes. The transport industry is one of the big beneficiaries in temple towns. Pilgrimages are popular across economic status.
In view of social distancing, many may not feel safe to visit religious places, especially on festival days. This will have a direct impact on the income of those who depend on pilgrims, they will find it difficult to meet ends on a daily basis.
Opportunity: Digitization. Devotees will need to get their pujas done by ordering digitally.
There are many other industries that will see a behavioural change from their customers. Take the case of Salons – people are talking about buying all the necessary tools (all kinds of scissors) and getting the stylist to come home (which is not 100% safe). Companies like UrbanClap could benefit from this move.
This is one area which doesn’t affect me much 🙂
Discretionary spending is expected to come down. Without government’s support it will be difficult to restart industries. An effective rescue could cost the government about ₹10 trillion extra.
This is the time for each of us to innovate and bounce back. We are down but not defeated. We will bounce back. And let each of us do our bit to bounce back high.