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The road to economic recovery amid Indian Festival Season

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The coronavirus led pandemic and thereafter imposed stringent nationwide and local lockdowns have deeply affected the economy of every nation in the world. the supply chains have disrupted, the demand has dropped and the spending of money has been limited. But now, since the festive season is around the corner, can we expect to see a shift in demand? Will the economy witness a revival? Will the consumer spending jump up?

Well, let’s dwell deeper into the issue and analyze all the demand and supply-side factors.

What internal factors will determine the recovery path for firms?

The adaptability and flexibility in the organizational structure will be prime factors. The finesse with which a firm would be able to cut down on its costs, leverage capital, and maintain cashflows is also crucial. Good governance, cost structure, and adaptiveness determine the virtuosity of a firm wherein the firms with good governance, less leverage, and the ability to raise capital and innovate to adapt in the current pandemic situation will not only survive the crisis but also prosper now and after.

The recovery of the economy will also be highly impacted by other top-down factors like fiscal and monetary stimulus as well as bottom-up efforts of the businessmen and entrepreneurs.

While the pandemic continues do we see any ray of hope of recovery?

Despite normalization of economic activities and lifting up of lockdowns, the count of active cases is dropping and a vaccine seems to be on the horizon. India has achieved a surplus in its current account balance on account of a decline in oil and gold imports along with the drop in Chinese goods imports as a result of the boycott china movement initiated after the LAC border stand-off. The foreign exchange reserves are on the verge of exceeding foreign exchange debt as the reserves jump by record-high amounts this pandemic season.

Investments, whether direct or portfolio, are being welcomed by firms globally as they open up their purses. New reforms such as agriculture reforms and labor reforms will largely impact the rural population in a positive way. Moreover, the postal life insurance schemes will also step up the game for the Indian subcontinent in the race to becoming a global manufacturing hub. However, a lot is still to be done in the direction.

The results for the quarter ending in September 2020 by and largely exceeded the street expectations with margins expanding across sectors due to deep cost cuts; for example, in the auto and consumer durables sectors, the volumes are more than expected.

But then there is more to it. The demand and consumer expenditure have risen, no doubt, but this rise needs to be sustained.

How will the Indian festive season be celebrated this year amid the virus?

The Indian festive season is around the corner with all major occasions such as Diwali, Christmas, and New Year lined up. But this year the festivities won’t be the same as before. The economic, social, and personal impact of the covid-19 pandemic would act as a major hindrance to the celebrations this year. The monetary factor will obviously deteriorate the level of celebration in Indian households but more than that the social factor would stop people from living their hearts out this season.

Money is just one single factor which we have been taking into account all this time. There is more to the scenario. The problems, aftermath, or beliefs that are going unnoticed.

Let’s bring them into the spotlight.

A festival is celebrated to remark the happiness and belongingness of individuals in social circles. The gatherings and festive meet-ups look like a long-lost concept this year. Public gatherings are forbidden and private plans are limited. The pandemic has had a disastrous effect on the mental health of the patients, knowns of patients as well as others in general, which basically makes it everybody. More and more people are facing mental and psychological problems such as anxiety, obsessive-compulsive disorder (OCD), and depression. The complaints of crimes against women have also jumped up. There has also been a drastic increase in the cases of domestic violence and depression and suicides among women as now, they are forced to stay indoors all the time with their exploiters. Celebration, when the majority of families are battling one or the other problem, will be a mere formality for most.

The businesses were shut during the time when lockdowns were imposed to contain the virus. This was the longest time ever in recent history when everything, including the economic activity, came to a halt. People have strived to find their means of survival and several have lost their jobs while many who still have them have faced deep salary cuts. Adding to this is the fact that little to no employees are hoping to receive any festive bonus this season. This situation is visible in all economic and social spectrums of society; from the millionaire to the wage-earner and from Brahmans and Pandits to low caste and minorities. On account of this, people have survived all this time by fulfilling their bread and butter needs from their year-old savings. The amount they had incessantly saved all these years has vacuumed into daily consumption. Needless to say, people are now terrified to spend more on the festivities for the simple reason they don’t have any to spend.

One last, but most important factor we have is the COVID-19 disease itself. The virus has spread like a wildfire, infecting millions, and taking the lives of thousands. The Indian ideology believes that when a family experiences a death due to any reason, they cannot celebrate festivals for a year generally. And without any questions raised, the coronavirus pandemic has killed many in many families. These affected families would no longer be interested to celebrate the upcoming festivals even when they have the monetary sources to do so. India so far has recorded 123 K deaths, which means that 123 k families will be reluctant to celebrate festivals and in turn, spend their incomes or savings to procure materials from the market.  

Therefore, even when the active cases are dropping and the signs of economic recovery are visible, the Indian festival season would not be as extravagant as before. Just like every other thing this year, the festive season will also be celebrated in a new socially-distanced way.

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