The months of April and May 2020 were a washout for most as the country went into a complete lockdown in its battle against COVID-19. This year as cases surge once again, Maharashtra has imposed severe restrictions on everything non-essential.
As Chief Minister Uddhav Thackeray also said, it’s not a complete lockdown. But, non-essential retail stores, shopping centres, restaurants, bars and even industries, which don’t make essential goods or are not export-oriented, will have to shut till at least May 1.
Several other states have also imposed some restrictions like night curfews. However, Maharashtra is the largest state in the country in terms of GSDP and has a share of around 15 per cent in GVA (gross value added). So, tough restrictions there are bound to have an impact on the wider economy, even if the hit is not expected to be as huge as last year.
The Confederation of All India Traders (CAIT) estimates ten days of night curfew and partial lockdown caused a business loss of about Rs 46,000 crore, of which the retail trade loss is around Rs 32,000 crore.
According to Praveen Khandelwal, secretary-general of CAIT, retail trade has lost Rs 10,000 crore and wholesale trade loss is around Rs 4,000 crore in Maharashtra alone.
Restaurants too can only offer home deliveries, a step that was taken at the beginning of the month itself. Given that the industry had only just begun to recover following last year’s curbs, these fresh set of restrictions will be a big blow for many, especially small standalone hotels and restaurants.
Shivanand Shetty, president of AHAR (Association of Hotels and Restaurants), recently wrote a letter to the Maharashtra chief minister that a lockdown “may completely dismantle the fragile structure of our industry, which is still not out of the woods.”
“Any further disruption would lead to distress beyond redemption,” he had said in the letter and sought a relief package that would take care of the restaurants’ statutory dues, licence fees, property taxes, electricity charges among other things.
With temperatures soaring across the country in recent weeks, the consumer durables industry was expecting a bumper summer season for products like air conditioners and refrigerators. However, the restrictions have come as a dampener, especially in a large state like Maharashtra.
“All the brands will be impacted in Maharashtra as manufacturing will have to be stopped,” said Kamal Nandi, president of appliances industry body CEAMA.
Barring durables that are essential, for instance, refrigerators that are needed for the healthcare industry, companies won’t be able to manufacture any product, said Nandi, who is also business head executive vice-president at Godrej Appliances.
With retail stores also shut, companies are looking at an impact on sales too.
Credit rating agency CRISIL expects revenue of shopping malls will grow 45-55 per cent in the year ending March 2022, compared with an estimated 45 per cent decline last financial year. However, revenue this year will still be 15-20 per cent below the pre-pandemic level due to the various curbs in the second wave of the pandemic.
“We foresee retail sales in malls declining significantly in the first quarter of this fiscal versus pre-pandemic levels because of fresh restrictions, and recovering gradually by the end of the first half,” said Anuj Sethi, senior director, CRISIL Ratings.
Shopping malls in Maharashtra, due to the stricter restrictions, will be impacted the most, it says. Furthermore, the restrictions imposed in various states is also expected to impact inter-state trade and supply of raw materials and finished goods, say executives.
After entering a technical recession (the economy shrank in April-June 2020 and July-September 2020), the various segments of India’s economy saw a faster-than-expected rebound. Data from CARE Ratings shows that seven out of the nine indicators, including power, e-way bills, two-wheelers, GST, petrol consumption, corporate bond issuances and bank credit showed strong improvement.
However, there could be some “reverses” in April, given the restrictions in states like Maharashtra.
Barclays said on Wednesday that localised lockdowns in key economic hubs could cost the economy an average of $1.25 billion each week.
If the current restrictions remain till the end of May, the cumulative loss of economic and commercial activity could be around $10.5 billion, it had further said.