Joint Managing Director, Alubee Die Casters
Expert Commentary Corona Crisis in India - What Stakeholders (Can) Do
Identification of critical functions and roles and development of back-up plans is one of many important points that companies should implement now. Also the Indian government has already taken numerous measures to support companies. But is this enough?
The coronavirus has already spread throughout the world and has thus also arrived in India. The consequences will affect the entire Indian value chain, as it may spark a global recession, leading to widespread loss of consumer confidence, significantly impacting revenues, and profitability. Moreover, companies may be forced to divert capital to shore up continuing operations, while research and development funding for advanced technology initiatives is starving. As a further consequence, the exit from unprofitable global markets and vehicle segments could be accelerated, with a significant amount of restructuring expected in the automotive sector in particular.
Action Recommendations for Companies
One of the greatest dangers is to succumb to rapidly deteriorating market conditions, which would lead to far-reaching disruptions and possible consequences around the world. But what can companies do now to counter the crisis? Ideally, companies should adhere to the following points:
- building of team structures that work remotely: smaller, cross-functional network-of-teams
- leveraging technology team to empower remote work capability
- conduct scenario planning to understand how inventory buffer changes in various cases
- use of market insights/external databases to estimate the demand for customer’s customers
- identification of critical functions and roles and development of back-up plans
- creating a plan to prioritize & protect valuable customers: Focus on cultivating the essential segments (highest margin)
- building customer trust through transparency: judiciously choose where to invest, based on analysis and planning
- understanding of current available cash and project change over extended shutdown
- identification and execution of immediate, low-risk levers to improve cash flow
But it is not only the companies themselves that now need to take action; also the state has already intervened to address the existing problems in a targeted manner. These measures include:
- tax concessions for industry sectors hit hard by the disruption due to the coronavirus, particularly MSMEs, services, and exports.
- talks with the World Bank for an unprecedented package
- moratorium on selected tax payments for some sectors, reduction in import and export duties, relaxation in payment of dues and fees, and additional interest subvention for exports.
- repo rate cut of 75 basis points, a reduction of 100 basis points in the cash reserve ratio to free up liquidity, and a three-month moratorium on loan repayments.
- extended validity of e-way bills till April 30, 2020
- deferred application of 10% restriction for availing input tax credit from February, to August 2020
But there is more that can be done: For example, the government should roll out SOPs to support MSMEs that manufacture locally. Furthermore, investing in online infrastructure and encouraging small businesses to source locally could help to improve manufacturing. Besides relieving the MSMEs of loan repayments, and relaxing bad loan norms the government could allow subsidized warehousing to exporters while figuring out the supply chain. These measures could give the Indian economy enough strength to emerge from the crisis with as little damage as possible.