COVID-19 pandemic is prevalent everywhere and affecting the industries in length and breadth. However, the most important aspect is how the industry can overcome the negative impact of this outbreak. Pankaj Bajaj, Promoter Director, Bajaj Industries in this article narrates the overcoming aspect vividly by emphasizing on the factorials involved.
We learn from History that a pandemic ends in 2 ways: First, a medical one where the death rate drops; and second, a social one wherein the fear of disease wanes.
The first one is dependent on the behavior of the VIRUS, as well as the medical response to the disease; whereas the second one is dependent on how we interpret the data & how much hopefulness we share for the future.
Positive Outlook is very powerful and works in 2 ways::
1. Confidence about the Times to Come: This is similar to placebo effect and really is a mental state based on a variety of factors which aids in releasing the chemical Serotonin thus making us feel happy. It can be nice weather conditions, your favorite sports-team winning, Camaraderie between friends, etc. This optimism will lead us to working hard, somehow managing to survive in spite of difficult conditions, to invest today to build tomorrow, and to search for the silver-linings amidst the clouds, etc.
In this specific case of pandemic our perceptions about the health, economic, and social events make a huge difference. There is a high chance of coming to wrong conclusions with constant bombardment of negative news on social & mainstream media; and most of them are unsubstantiated opinions tailored to surprise us. We really need to make a conscious effort to avoid such information.
2. Multiplier Effect on Economy: The biggest after effect of this pandemic seems to be a lack of demand due to cuts in consumer spending. There is a natural tendency during times of uncertainty as the discretionary spending is stopped.
For example, let us say that on an average a person in India spends about 80 percent of earnings in normal times and saves the balance. This creates an economic multiplier of 5 times as it leads to a chain of spending. {The equation goes like 1/(1-X) as every elementary student of economics knows, and it is as also called the marginal propensity to spend}. Due to some risk aversion like the present one, if this spending falls to say 60%, it devastates the economy as the multiplier falls to 2.5 times which means demand is halved by just reducing the spending to the extent of 25 percent.
The power of this effect is always taken into account by monetary economists when they undertake quantitative easing of policies for loose money wherein they encourage people to come out & spend by reducing the cost of money & increasing its availability. In the final analysis, no amount of liquidity support can work if the animal spirits of entrepreneur & propensity of the consumer to spend do not fire up.
Therefore, instead of doubting and restraining self, please do what you have always done best without thinking too much. Ultimately balance will restore & winners will emerge out of this. Winners will be those who plan in advance, preserve resources, look for opportunities, and most importantly are optimistic about the future.
Silver Linings:
In fact, there are several silver linings to the clouds looming large at this moment as world shows its first tentative signs of moving out of this pandemic. Some of these are:
1. Geopolitical rejig which may lead to creation of new opportunities for India. This specifically refers to the new supply chains being drawn as the world makes an effort to decouple from China. There are several industry segments wherein India has traditional advantage of getting a huge leg up. Healthcare spending is expected to increase worldwide and ageing societies of developed countries will look for high quality & cost effective medical tourism. India has huge advantages here due to its large pool of caregivers, capable doctors, and nurses. Technology is another mentionable factorial. As the use of technology for various business applications & communication surges, India being already at the forefront with its IT services & startup architecture is uniquely placed to capitalize. For traditional medicines, many consumers across the world are being drawn to the traditional Indian immune-boosters as well as healing methods like Ayurveda .This gives huge opportunities to some Indian Pharmaceutical companies. They will also benefit from the increasing spending on health.
2. More proactive approach towards policies has been taken by the Government with the turn of events. A crisis is too big to an opportunity to waste. The case in point is: some State Governments are taking big decision to roll back the labour laws inhibiting the flow of foreign investments in labour intensive sectors.
3. Self-learning & rediscovery made by many persons during their long period of home stay can be a game changer for the life going forward.
Conclusion:
Let us not forget that humankind have lived through hotter times & colder times, through floods-and-famines, and through war. Civilizations have been built even after they were wiped off completely; and unprecedented peace & prosperity emerged after the World War. By these standards this event is only a small dot in the timeline of this world & all it is expected to do is to exacerbate a few trends & suppress some others.