Coronavirus Impact in India: Oil, Healthcare, Exports, Pharmaceutical, Hospitality and Construction

The coronavirus pandemic has sent shockwaves to the health system, societies, and economies around the world. A detailed explanation of how Coronavirus is impacting various sectors in India:

Dramatic Fall in Oil Consumption

As transport and travel activities have come to a halt for containment of the Coronavirus widespread, the oil consumption has witnessed an unprecedented fall. The global oil demand has come down to 29 million barrels a day as against the previous year. Further, the experts predict that the demand will be for 23.1 million barrels per day below year-ago levels.

However, it would recover gradually by December 2020. The low prices may appeal to consumers in the short run but will financially burden oil companies. Despite the drastic coronavirus impact, the retail price is not coming down as the government is using it as a buffer to fund its expenses. However, when the lockdown ends, it will face pressure to reduce fuel prices for consumers.

Cut in Size of the Workforce in Oil Industries

According to an estimate of BW research, due to the Coronavirus impact, oil and gas companies will let go of 30% of its employees in the first quarter of 2020. One of the world’s biggest US-based oil field services, Halliburton, laid off 3500 workers at its headquarters in Houston last month. Similarly, Canary Drilling Services fired around 200 employees. Also, the US oil futures came down to zero per barrel on 20th April.

Coronavirus Impact on Construction

According to Care Ratings, the construction sector will witness a slump of 5% to 8% in revenue as the work halts entirely for the first quarter of the current fiscal. Though the government has permitted the resumption of construction activities, the timely return of labour from their hometown amid the lockdown is a considerable challenge.

Further, as most of the collections are made in the last two weeks of March, the same must have been tepid due to the pandemic. Also, fixed costs of construction activities, including employee expenses and rentals, have further added to the problem.

Hospitality Sector

The Coronavirus pandemic has bought an unprecedented phase in the history of the hospitality industry. With all the travel, whether for leisure or work, coming to halt, the hospitality industry has felt the heat deeply. Confederation of Indian Industry reports that the effects of the lockdown and slowdown can to stretch till October 2020. It expects normalcy in the hospitality sector by the end of 2020. The hotel owners state that the guests are nervous and hence are cancelling their future bookings.

To keep consumers engaged, hotels like Hyatt and Hilton are offering home delivery. They have partnered with Zomato and Swiggy and have shared their menus on social media. Also, IHCL and ITC are allowing the customer to collect their ordered food via contact with less delivery. 

While the hospitality sector continues to suffer, there are some standing in solidarity with their guests. A hotel in Delhi has its guests stranded waiting in to return to their countries. Also, a hotel in Kolkata has assigned 20 rooms to medical practitioners and staff. 

Impact on Healthcare Sector

The pandemic would cost huge to the health sector. Though private hospitals are extending full support to the government in terms of equipment, isolation wards, and workforce, the health industry is bound to face challenges. The pandemic has decreased the surgeries, international patients, and OPD footfall. It will impact the cash flows of hospitals as 80% of the costs are fixed. That apart, the crisis has hit hard the medical devices industry. The situation in China has disrupted the exports of critical raw materials and the export of medical devices.

Pharmaceutical

Pharmaceutical drugs made in India are known for quality standards and are exported to developed economies. However, the Indian pharmaceutical industry is facing fierce competition from China as it has more significant cost advantages. The disruptions in the supply of low-cost API from China have decreased the efficiency of the operations of the pharmaceutical industry. The supply-side disruption will cut 10-15% of their revenue. However, the sector will revive soon as the government extends full support. Also, resumption in China’s drug production will alleviate the supply chain as India imports 85% of pharmaceuticals ingredients from China.  

Exports 

Federation of Indian Export Organisations stated that about 1.5 crore people would lose their jobs owing to the cancellation of over half of the export orders and a gloomy forecast of global trade. Exporters stated that they have very few orders left and will suffer irreparable losses if the government does not allow factories to work with the minimum workforce. President of FIEO has recommended measures like interest-free working capital term loans to exporters to cover the cost of wages, rent, and utilities to prevent the factories from the closure.

Renewable Energy Sector

The declining oil and gas prices have the potential to cause disruptions beyond the energy sector. As China is one of the largest producers of renewable energy equipment, the extended closure of China’s manufacturing units can impact the global supply in the short and medium-term. Further, there are predictions that China’s battery storage production capacity could decrease by 10%. However, this can be seen as an opportunity to launch aggressive, long-term strategies for a diversified, reliable, and secure energy system that will sustainably support the future growth of the world economy.

In all, the world is in a dramatic shock, facing a series of challenges. Therefore, the government must make a balance between lives and livelihood to reboot the economy in the right way.  

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