While it has been quite a break I didn't write because it felt like just reading out the news to all you people, but finally I am glad that there are relaxations provided for the economic revival. While the government is doing a good job the virus situation is likely to be there for 2 years and if the relaxations wouldn't have been provided now then it would have been very difficult for most of the people to survive the crisis.
India as a country gave a stimulus package but any country cannot have a lockdown period for long enough time as they wont be able to provide to everyone. While we have certain problem populations is the major one wherein not all can the citizens will be able to take the benefit from this situation.
Again I would like to give macroeconomic views and some problems which would have been of the lockdown relaxation would not have been provided.
Macroeconomic views
While many are talking about herd immunity I wont be even discussing about it, as I am no expert in that field, but there were few serious issues.
Migrant Labour worker
This is a major problem to most of the companies wherein those workers who were not able to travel to their homes will travel after the lockdown is lifted totally. Companies which focus on localisation would be facing less issue but there might be an increase in wage demand from the local workers because of the unavailability of the migrant workers who are willing to work for less money and for more hours also. The owners now are not able to afford the salaries for eg: even companies like reliance is going for 50% salary cut then it can be seen that MSMEs will definitely looking to reduce their fixed costs and negative cash outflows.
Demand Collapse
While most are expecting the demand to rise like our share markets have risen, it is practically impossible for the consumption to increase in a 'V' shape manner, it is most likely that the consumers will be looking after the survival instinct and will wait for a risk averse situation and then start pouring their money in them.
Liquidity Problems
Though this is always a problem, MSMEs will be most likey to be affected if the banks does not pour liquidity into the system. While government projects play a major role it is the responsibility of the government to pump in cash for the due payments and not delay in payments. There is a certainty that there will be cash flow problems for next 6-7 months pertaining to the situation and I expect at least 10% of the businesses closure due their overheads and not maintaining a proper cash balance.
The food supply chain
This was a problem and will remain a problem in distribution of the food grains, even though the government had the stock of 1 year and for this year the purchases have just started, situation such as hoardings were seen and it is likely that the prices of such ingredients is likely to go up. The migrant labourers who were stranded had difficulty in getting food from ration shops and those whose family is big didn't had proper amount of support.
Stimulus
While all that had been announced was not a government expenditure done looking at the corona virus but just some amount of addition to the expense what the government does every year and maybe releasing the payments on time. While a proper expenditure on revival is expected which will increase the demand and provide liquidity to the MSMEs.
While many might be enjoying the lockdown, there are various decisions by the government looks like harassing the MSMEs such as the employees must be taken by the bus to their workplace. While many companies are already having liquidity problem and inadequate staff this creates another hurdle, in a manner to stop the company from working. There are many people who have lost their single source of income and the millennials are not likely to understand these as many of them dont have responsibility of running their house.
Even government decisions to hault the payment of Dearness Allowance to their employees there was oppose from their employees than how does government expect the private companies to pay their employees for months without earning revenues. Almost 70% of listed companies had earned zero revenue in April and I haven't counted the MSMEs till now.
Investment in future
Post covid era will be totally different wherein there will be disruption in the industry as the whole industry would try to get into automation, many jobs will be lost but even more than the jobs lost there will be more employment for the new opportunities and only for those who keep on upgrading their skillset.
I believe most of the savings must be exhausted but even for those who are left with something must follow simple steps by looking into the future. While horse was replaced by cars because of increase in speed, this time we are focusing on mileage achieved by bringing electric cars by creating a disruption in the existing business. We might not be able to build a car manufacturing business but atleast invest in ancillaries.
For eg: before making cars we will be needing infrastructure to support the cars for long range runs such as charging stations, batteries, solar power parking plots etc. Thus we may invest in companies which will be essential for future such as steel making companies, solar cell making companies.
We would be looking at the companies which are directly or indirectly investing to support green business because that is the future we are looking for, while it is not said by be but I read a report in which people like bill gates said that investment now in climate change would bring in a return of atleast 400% within next 20 years. While many see but totally ignore the fact that climate change in happening and making us change the way we used to do business, than why not look at climate change as an investment opportunity and the better thing is one must not need to have the knowledge of fundamental analysis but just a good viewpoint into the future.
India as a country gave a stimulus package but any country cannot have a lockdown period for long enough time as they wont be able to provide to everyone. While we have certain problem populations is the major one wherein not all can the citizens will be able to take the benefit from this situation.
Again I would like to give macroeconomic views and some problems which would have been of the lockdown relaxation would not have been provided.
Macroeconomic views
While many are talking about herd immunity I wont be even discussing about it, as I am no expert in that field, but there were few serious issues.
Migrant Labour worker
This is a major problem to most of the companies wherein those workers who were not able to travel to their homes will travel after the lockdown is lifted totally. Companies which focus on localisation would be facing less issue but there might be an increase in wage demand from the local workers because of the unavailability of the migrant workers who are willing to work for less money and for more hours also. The owners now are not able to afford the salaries for eg: even companies like reliance is going for 50% salary cut then it can be seen that MSMEs will definitely looking to reduce their fixed costs and negative cash outflows.
Demand Collapse
While most are expecting the demand to rise like our share markets have risen, it is practically impossible for the consumption to increase in a 'V' shape manner, it is most likely that the consumers will be looking after the survival instinct and will wait for a risk averse situation and then start pouring their money in them.
Liquidity Problems
Though this is always a problem, MSMEs will be most likey to be affected if the banks does not pour liquidity into the system. While government projects play a major role it is the responsibility of the government to pump in cash for the due payments and not delay in payments. There is a certainty that there will be cash flow problems for next 6-7 months pertaining to the situation and I expect at least 10% of the businesses closure due their overheads and not maintaining a proper cash balance.
The food supply chain
This was a problem and will remain a problem in distribution of the food grains, even though the government had the stock of 1 year and for this year the purchases have just started, situation such as hoardings were seen and it is likely that the prices of such ingredients is likely to go up. The migrant labourers who were stranded had difficulty in getting food from ration shops and those whose family is big didn't had proper amount of support.
Stimulus
While all that had been announced was not a government expenditure done looking at the corona virus but just some amount of addition to the expense what the government does every year and maybe releasing the payments on time. While a proper expenditure on revival is expected which will increase the demand and provide liquidity to the MSMEs.
While many might be enjoying the lockdown, there are various decisions by the government looks like harassing the MSMEs such as the employees must be taken by the bus to their workplace. While many companies are already having liquidity problem and inadequate staff this creates another hurdle, in a manner to stop the company from working. There are many people who have lost their single source of income and the millennials are not likely to understand these as many of them dont have responsibility of running their house.
Even government decisions to hault the payment of Dearness Allowance to their employees there was oppose from their employees than how does government expect the private companies to pay their employees for months without earning revenues. Almost 70% of listed companies had earned zero revenue in April and I haven't counted the MSMEs till now.
Investment in future
Post covid era will be totally different wherein there will be disruption in the industry as the whole industry would try to get into automation, many jobs will be lost but even more than the jobs lost there will be more employment for the new opportunities and only for those who keep on upgrading their skillset.
I believe most of the savings must be exhausted but even for those who are left with something must follow simple steps by looking into the future. While horse was replaced by cars because of increase in speed, this time we are focusing on mileage achieved by bringing electric cars by creating a disruption in the existing business. We might not be able to build a car manufacturing business but atleast invest in ancillaries.
For eg: before making cars we will be needing infrastructure to support the cars for long range runs such as charging stations, batteries, solar power parking plots etc. Thus we may invest in companies which will be essential for future such as steel making companies, solar cell making companies.
We would be looking at the companies which are directly or indirectly investing to support green business because that is the future we are looking for, while it is not said by be but I read a report in which people like bill gates said that investment now in climate change would bring in a return of atleast 400% within next 20 years. While many see but totally ignore the fact that climate change in happening and making us change the way we used to do business, than why not look at climate change as an investment opportunity and the better thing is one must not need to have the knowledge of fundamental analysis but just a good viewpoint into the future.
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