THE ECONOMY IS SICK
Mahadev Kadam, 48, wears a stony look as he sits in his small textile shop in Panvel in Navi Mumbai, watching the pouring rain on an August morning as he prepares for yet another day of scanty footfall. He says there was no business from end-March to end-June because of the lockdowns ordered by the central government and local administrations, and though business seemed to pick up in the initial days after his shop reopened in end-June, that soon fizzled out.
Huddled in a chair, behind a rope tied across his shop’s entrance to stop customers from going in—as instructed by local authorities—he says he can’t remember a worse time in his three decades in business. “Forget replenishing stock,” he says, “I haven’t even sold out the old stock I bought in the new year. Even the Ganesh festival (which began on August 22) hasn’t helped.” He has bills to pay—Rs 8,000 monthly rental for his shop—and with the three-month moratorium he availed on a personal loan ending in August, he faces an uncertain future.
The Covid-19 pandemic, the protracted lockdowns and weak demand have devastated millions of businesses across India, both large and small, pushing several like Kadam’s into bankruptcy. The service sector remains the worst hit, especially for firms in retail, hospitality and travel. Several MSMEs (micro, small and medium enterprises) are struggling to survive or are working at a fraction of capacity. Some have been forced to change their product portfolio altogether, switching from engineering products or chemical goods to making hand sanitisers, soaps, personal protection equipment and the highly in-demand masks—but earning much less than before. Even large businesses are operating their plants at low capacity, managing with fewer staff, and laying off the rest. The knock-on effects are visible as well. The Centre for Monitoring Indian Economy (CMIE) says that 18.9 million salaried workers have lost their jobs since the lockdown began, with about five million jobs lost in July alone. This, in turn, has hurt demand, and poor demand has crippled investment. Businesses are borrowing less from banks as they put investments on hold. The banking sector—burdened with Rs 7.27 lakh crore worth of bad loans, as per government estimates—is likely to see even more NPAs in the coming months as individuals and companies default on loans due to business failures.
