The Ripple Effect of Flattening the CURVE

The Ripple Effect of Flattening the CURVE
  • Lockdown to cause behavioral changes in employees
  • This behavioral change among employees may result in productivity loss
  • SMEs require multidimensional focus for survival and are at high risk zone

As the republic of India undergoes the greatest crisis in its history, the self-distancing mechanism has not only flattened COVID’19 growth curve but also the economic curve too. Various experts, rating agencies, and industrialists have unanimously admitted that the pandemic will be an economic tsunami for developing countries like India. The actual impact of lockdown is way beyond the shutdown period, industries will continue to experience the crunches in upcoming days as it requires additional days of the operation cycle to bring back material or service functional. The ripple effect of lockdown will be there in all sectors. 

“On the economic front, health care spending will see a definite uptrend in the future and which might throw up many investment opportunities in the health care sector. Working from home will no more be an exception but might become a norm. Online education may overtake the regular mode of education. Reverse migration and revival of agriculture might be the new trend.  Hence the urban areas might face a severe shortage of laborers affecting day to day activities,” said Dr. Norbert Lobo, an Economics Professor from Karnataka. 

The current freeze on production and supply coupled with slowing demand is the mere tip of the iceberg. In India, GDP growth is already at a decadal low and any further dent in economic output will bring more pain to workers who are already on the verge of a breakdown. It may not lead to a recession, but analysts believe the impact on India’s GDP growth will be significant. 

“The onslaught of Covid-19 on the Indian economy has to so substantially with on its position at global level, particularly, the competitiveness of India’s financial which is still structurally fragile in as much as it is highly susceptible to capital outflow in the event of global turbulence or any adverse development in the domestic front. Therefore, India is also likely to confront a steep financial crisis in the aftermath of this global pandemic in terms of financial illiquidity resulting from the exodus of funds. This, in turn, will magnify the economic limbo at home. Thus, to take from its heart, this global pandemic will undoubtedly land the Indian economy on a poignantly stressful dynamic soon, given the government’s capacity of containing the ongoing parlous situation,” said Prof. Mainak Bhattacharjee from Kolkata.

SMEs at High Risk Zone

The SME sectors are the livelihood of more than 11 crore people in the country as per various reports this sector contributes nearly 30 percent of India’s gross domestic product and close to half of the country’s total exports. With a tough economy currently, relief interventions need to minimize permanent damage to lives and livelihoods. At present, the majority of the relief is centered to direct individuals which is essential. But negligence to pay attention to the other core aspects of the economy may leverage effects on multiple other sectors.

Among the many parts of the economy that require immediate attention, the small and medium scale enterprises top the list. Its initial impact will come in the form of supply-side disturbance stemming from lockdown in as much as impairs of labor. So, supply shock is inevitable and this which will manifest is crippling of the informal sector or unorganized sector of the economy which roughly accounts for 45per of GDP and more 80 percent of the workforce. As a result, GDP will contract significantly so will the employment in the wake of this pandemic. 

“Now supply-side backlash will spill over into the demand side as much as plummeting employment is associated with worsening of purchasing power and thereof the weakening aggregate demand. This demand-side spillover will eventually set in a negative multiplier effect which will accentuate the crisis though cumulative contraction of GDP and employment resulting in prolonged depression,” added Prof. Bhattacharjee. 

Most of the entrepreneurs from the SME sector lament over the lack of efficient economic packages. CEO of a medium enterprise in Bengaluru opined “at present several enterprises survive by salary cuts and we need economic packages to navigate through these challenges and government support are essential to revive.” This relief packages aim to keep the industry afloat during this difficult time, Except for the FMCG and healthcare sector, most of the SMEs require such initiatives to lessen the overall burden. Larger companies will be able to see the crisis through for a longer period. it would gradually become difficult for large companies to sustain jobs if the situation does not improve. 

Whereas experts predict a prolonged effect on businesses beyond the direct economy crunches. Coping with the behavioral change among employees that may result in productivity loss. “Health-related issues like anxiety, stress, insecurity, and inferiority, breaking relations to name a few would be the worst adverse impact of Covid in the days to come,” Added Dr. Lobo.

Essential Coping Mechanisms 

As an immediate relief, most of the firms request for an enhanced credit to industries through banks, with an interest suspension up to five percent. There are also enterprises that look forward to an additional loan limit for three months for their wage payroll. 

The WTO has projected that global trade in goods is set to decline steeply between 13 percent and 32 percent in 2020 as countries across the world. Hence the country’s outbound shipment will fall lower. Firms must develop independent strategic plans to cope with it and alternative ways of boosting the individual economy are essential. 

Effective planning for calling back their workers as several of them have migrated to their villages and towns needs to begin. Those institutions who indulged in salary cutting and layoffs in the time of difficulties need to re-erect the faith of the employees are essential to establish loyalty.

The human resource departments need to be equipped with enough mechanisms to address the changing behavioral patterns of the employees. The Coronavirus has become almost synonymous with the fear of the unknown which is often associated with the feelings of panic. Lack of information or the wrong information, either provided inadvertently or maliciously is surrounding our lives and living today. The preventive measures of self-isolation or social lockdown, in the long run, might alter the very way how human beings behave and relate to one another. 

Rajesh Manjunath, an HR Professional in a corporate firm said “It is an extremely difficult situation for anyone to be in, because of the uncertainty, stress, and anxiety being brought about by this unique scenario. To cope with all these unpleasant and negative feelings, it is advisable for institutions to encourage their employees to take this time to learn new skills, update themselves & catch up on things that have been on the to-do list. Institutions must be connected to their employees constantly and support them in their pursuit of learning and career enhancement.”

The employee’s mental and physical wellbeing and mechanisms to increase productivity are highly essential to the sector. The longer the lockdown and stay-at-home orders are in practice, the longer business operations are closed, the harder the revenue shortfalls. We all look forward to a safe restart to revive at the earliest.  

Read More

Recent Articles