COVID-19 - Indian Economy Suffers Supply - Demand Disruption

Surface of coronavirus in China in December 2019, and its spread in more than 200 countries in the subsequent period, led to severe global supply disruption. India is not spared from this global pandemic and consequent supply disruption. Many companies in automobiles, steel, pharmaceuticals, consumer durables and many other sectors are dependent on the supply of components and other intermediate goods from China. The other supply options for India are also closed due to spread of the virus throughout the globe, affecting the availability of goods and services to Indian consumers as well as the country's capability to export to other markets.

The pandemic-driven Tlockdown compelling people to stay home has severally affected the demand side. There is seen not only contraction in the demand but also a substantial change in the demand composition. On the one hand, consumers have been compelled to indulge in panic buying and hoarding essential goods excessively due to persisting uncertainty on the horizon, on the other hand they have been made to postpone the purchases of nonessential items, creating an uneven distribution of demand amongst the different product categories. The changing composition is further straining the global supply chain by creating excessive artificial demand for essential products and buildup of unsold inventories for others.

Though no sector of the Indian economy has remained untouched by the lockdown, the worst affected sectors by the double whammy of supply and demand disruptions are Micro, Small and Medium Enterprises (MSMEs), aviation, tourism and hospitality, real estate and automobiles.

Emergence of New Business Models

Amidst supply and demand disruptions, for survival, new sustainable business models, strategies and practices are explored by business organizations though as of now they may appear less profitable.