Govt revenues have collapsed and won’t return to normal anytime soon but raising taxes would be unwarranted

The Goods and Services Tax (GST) regime introduced by the Narendra Modi Government has, despite its many flaws, made life a lot easier for consumers and producers, who now have to deal with one particular rate instead of multiple ones. However, in the aftermath of the Coronavirus-induced economic malaise, we might get to see another aspect of having one tax, the collections of which are managed by the Centre and further distributed to States. With the latter actively cribbing about not receiving their due compensation from the Centre, expect the coming GST Council meet to be a fiery one, particularly with the political scene heating up. With the extended deadline for filing returns and dismal collections because of the lockdowns, the Government has not released collection figures for April and May. However, States will have to be paid their compensation for the revenue loss due to GST implementation. It is almost certain that the guaranteed 14 per cent cover for any revenue loss annually, promised during the GST rollout, might not be paid either this fiscal, or actually any fiscal till 2022, thanks to the economic slowdown unless the Centre absorbs some of the loss. The States are clearly in a quandary as most of them are battling the worst of COVID-19 spirals amid a collapsing health infrastructure. It is to assuage some anxieties that the Centre last week released compensation worth `36,400 crore to States for three months up to February 2020. Besides dwindling cess collection in the compensation fund, the dependency of States on the promised GST compensation amid sharp fall in their own revenues due to the COVID-19 pandemic has further led to hardened positions.

Raising GST rates might seem like an easy way to generate funds but it might have the horrible effect of killing whatever little remains of consumer sentiment. Indeed, several industries have appealed to the powers that be that there should be a relaxation in taxes and not an increase in order to boost near-term consumer demand. The federal structure of the GST Council also makes it difficult for either the Centre or any State to act independently, yet the GST Council should resist the urge to increase taxes and should look at other avenues to raise money from the market, including the possibility of issuing bonds that even ordinary citizens could buy into. Some suggestions for payment of compensation  cess from the Consolidated Fund of India or through market borrowings were, in fact, floated at the last GST Council session in March but a decision has been hanging fire since. In fact, the provision was made by then Finance Minister Arun Jaitley. He had assured that “compensation to States shall be paid for five years in full within the stipulated period of five years and, in case the amount in the GST Compensation Fund fell short of the compensation payable, the GST Council shall decide the mode of raising additional resources, including borrowing from the market which could be repaid by collection of cess in the sixth year or further subsequent years.” The Coronavirus has dealt a big blow to the economy but growth will resume. Predictions for the monsoons are positive and it is likely that the second half of the year will see a revival of demand. The GST Council has to resist any punitive short-term measures. It is difficult for the Government machinery to live with less but the solution to the hell the pandemic has wrought in India is not to squeeze the already suffering Indian consumer. Innovative solutions will have to be found on how to raise funds and even past decisions cast in stone might need revision. Depending on the mythical foreign investor to come and save the economy is not a substitute for a real plan.

(Courtesy: The Pioneer)

When one tech billionaire wants another’s company to be broken, should authorities listen?

Elon Musk is a provocateur, not a particularly good undercover one but a sampling of his Twitter feed makes for some very interesting reading if nothing else, second only to US President Donald Trump. One of his latest missives on the social media network was his demand to break up Amazon, the e-commerce and web-hosting giant founded by Jeffery Bezos. Should this be taken seriously? Is Amazon too powerful, not just in the e-commerce space but also through its web services? The huge money-spinning web-hosting behemoth that it has become today, it runs almost half the internet. This is indeed a question that competition authorities across the world should seriously ponder about. Amazon is a giant which has outsized shares of e-commerce and web-hosting providers. Its sheer size and scale makes it impossible for newer, smaller players to enter this space. In countries like India, it may be challenged by the likes of Walmart and Reliance Jio but in other parts of the world, that bird has flown. And unlike China, which is flexing its muscles to portray strength at a time of international weakness after the spread of COVID-19, Amazon has used the pandemic to acquire strength (and cash). Jeff Bezos actually became richer during the pandemic.

But competition is a funny thing. The last tech company that almost broke up was Microsoft during the bruising browser wars of the late 1990s. By the time anything could be done, Internet Explorer was already the “king” of browsers. But today, Microsoft doesn’t even make Internet Explorer anymore. It has pivoted itself towards becoming a quieter and more socially responsible tech company. Its former boss Bill Gates is known as the world’s great philanthropist today. So it isn’t out of the question that another company will come and take on Amazon, we just don’t know which one. But Amazon’s dominance highlights the dangers of big tech. And as for Musk, he is only starting his dominance in the electric car industry but with the technological lead Tesla Motors has, one could conceivably ask the question whether in a decade’s time, we will be asking for Tesla’s break-up?

(Courtesy: The Pioneer)

The COVID pandemic has impacted education the most, compelling nations to embrace e-learning. India needs to invest in infrastructure and put right policies in place

Nations across the world have taken different yet significant measures to limit the spread of COVID-19. The most immediate one taken by almost all countries was to cancel physical face-to-face teaching in schools and higher education institutions. All kinds of social and religious gatherings and public events, too, were banned. With a sudden shift from the classroom to e-learning, many wondered whether the adoption of online education would continue to persist post-pandemic and how such a shift would impact the education market.

Indeed, in India, too, physical classrooms have replaced online classes. The transition has mostly been smooth in private universities though public institutions are yet to adapt to the changes. This has led to widespread debates on the future course of classes — whether they should be conducted online or not. Realising the long-term impact of COVID-19, faculty members, too, are finding it hard to conduct online classes with ease. On the other hand, students have been left clinging on to their mobile phones, laptops and computer screens. What, however, is certain is that a post-COVID world must gear itself to adapt to some changes. Being physically present in a classroom may not be the only learning option anymore — not with the rise of the internet and new technologies, at least. As long as there is access to a computer with a robust internet connection, students can attend live sessions or watch pre-recorded classes. Does this mean that online education will soon replace classroom education?  It should be kept in mind that even though there have been huge technological advancements, they aren’t flawless. E-learning comes with its own set of challenges.

Challenges and possibilities: In the case of traditional classrooms, lack of engagement is problematic for teachers and students alike. Unlike online education, here, they cannot pause or rewind the classes in case they miss out certain chapters. On the other hand, online education is not as easy as speaking into the microphone at the one end and connecting a laptop or phone and listening on the other. There are other challenges with this form of education that have to be faced by both — faculty as well as students. While the former will have to put in extra labour to generate lectures, it will be difficult for the latter to make sense of it online. Then, how will this form of education compensate for the academic loss suffered by students? Practically speaking, there is no alternative to classroom activities.

Most important of all, even after so much digitisation, rural India will face unprecedented challenges due to poor connectivity and frequent power cuts that would affect the productivity of the classroom. Talking about access to electricity, according to Mission Antyodaya, a nationwide survey of villages conducted by the Ministry of Rural Development in 2017-18, 16 per cent of India’s households received one to eight hours of electricity daily, 33 per cent received 9-12 hours and only 47 per cent received more than 12 hours a day. Further,  according to data collected by the National Sample Survey as part of the Survey on Education (2014), only 27 per cent of households in India have some member with access to internet. Access to internet does not necessarily mean that a household actually has internet at home.

While increasing ethernet connectivity should be the larger goal, in the short term, data on mobile phones must be subsidised. Device ownership, too, is a problem and for this, the Government must provide for cheap smartphones for students to get on with the business of teaching. Organisations such as the National Institute of Open Schooling (NIOS), National Council for Promotion of Urdu Language (NCPUL), IGNOU and other such bodies offering distance education as well as the Government must assess current and future infrastructure requirements for digital age and bridge the gap.

But what if e-learning becomes the way of life for education? What would be the major issues and areas that require introspection? And what does this mean for the students going forward?

Most universities are now offering web-based file-sharing services to their faculty members and research communities. However, there are several other ways to make multimedia resources accessible over the internet. Certainly, the most familiar one is YouTube, which though ubiquitous and easy-to-use, does present challenges to classroom use that must not be ignored. The most glaring one is the comments section. The instructor can take it for granted that some comments will not be suitable for projection on a classroom screen.

Similarly, advertisements found lining the video could be a problem, too. Regardless of the product being promoted, the classroom need not be turned to a search service in order to access multimedia resources. To avoid this, a number of web browser extensions are available that provide for an unsullied viewing experience, hiding comments, menu side bus and advertisements from the view. A number of cloud-based tools, too, are available that allow files to be stored and shared across a remote host, which at the very least offer the instructor the flexibility to adapt. Foremost among these are Dropbox, which is a file hosting service that offers free data storage across several operating platforms. Amazon cloud drive offers 5 GB of free storage and provides a straight forward web-based interface for uploading and retrieval of files. Similarly, GoogleDocs allows for the uploading of entire folders to the cloud, making remote storage of a set of organised files quite easy.

Make the digital transition: Technological prospects for classrooms have evolved in remarkable ways since the COVID-19 pandemic. We have witnessed the successful introduction of smartphones that are capable of running audio-visual clips and interactive language drills; tablets are now replacing the laptop as an essential classroom gear; and there has been a rich array of online dictionaries. Further, news media and unicode blogs are now searchable in original scripts; a sea of websites are dedicated towards the study and dissemination of literature. The worldwide popularity of Facebook, Twitter, Instagram, Google classroom, Zoom, Cisco Webex and the user-centred design of web has addressed concerns of language use. Even mini tablets are now equipped with built-in digital camera. In fact, they allow students to use audio and video editing software immediately upon recording.  All of these advancements offer promising ways for the students to do their homework, going far beyond just a paper and pen.

The time has come for us to adapt to new and innovative teaching methods. So, what next? Most experts and researchers across academic institutions agree that there is a need to create standardised online education platforms.  Besides students and teachers must be trained to get accustomed to using digital technologies. Others highlight the necessity to introspect on the nature of these platforms and how students must be taught using different online tools and methods while keeping accessibility and the challenges in mind.

To look for possibilities, there is lack of clarity among teachers and researchers about the plan of action, especially with respect to teaching, examination, results, internships and placements. Challenges are many that need to be overcome. Some students without reliable internet access and technology struggle to participate in digital learning. This gap is seen across countries. Education is going to be digital in the foreseeable future. We will be better prepared to handle it only with the right kind of infrastructure and policies in place. The Government must pay heed.

(Writer: MJ Warsi; Courtesy: The Pioneer)

Business processes will change due to the pandemic and so should the way valuations of companies are done

Coronavirus cases are rising exponentially in India even as the country is in the midst of unlocking the economy. With the Government allowing almost all sectors to restart, companies are faced with the new challenge of valuing their businesses as a consequence of the pandemic. Nothing is the same now. The financial markets, the economy, real estate and almost all sectors have seen major turbulence and the uncertainty will not end anytime soon. According to the 2020, Brand Finance India 100 report, during the pandemic, the combined valuation of India’s top 100 brands dropped by $25 billion as compared to the start of this year. The uncertainty in future cash flows is now a hard reality. Organisations have to renew ways of measuring risks associated with the cash flow of their businesses as the categories of risk may have increased in the light of Covid-19.

The elements which are a part of the discount rates used in valuations, including the risk-free rate and unsystematic risks, may have changed, altering the way businesses approached valuations before the crisis. All business valuations are done on projections. However, in these unprecedented times, there is every chance that these projections might change. It has become difficult to quantify the short-term and long-term financial projections and the shape of economic recovery is also uncertain. It may be ‘V’ shaped, ‘U’ shaped or even ‘W’ shaped. Moreover, some industries may bounce back faster than the others. Even though governments across the world are providing economic stimulus, the fact remains that consumer demand may still be slow and may possibly see a paradigm shift in the long-term.

So, during these times, selecting a valuation model relevant to one’s own business is imperative. All three valuation methods — income, market and asset — are available to business managers and analysts. However, in the present situation, some methods may be more appropriate as compared to others. For example, of the two income-based approaches that are used to value a company, one may be more appropriate than the other now. The first method, the Capitalisation of Cash Flow (CCF) method is used by mature firms, which are relatively stable in their growth expectation and cash flows. Under this method, the valuator assumes a steady growth rate, picks a single income stream and predicts future income based on historical numbers.

On the other hand, the Discounted Cash Flow (DCF) method is more flexible and allows for more variations in the future cash flows based on varying growth rates, changes in the interest rates of debt repayments and any other factors that may change in future and could affect cash flows. Given this rising economic uncertainty and market disruption, DCF, with its flexibility to allow modelling of performance of future years of a business individually, with varying growth rates and cash flows till businesses stabilise, may be a more useful method. This method will not be devoid of challenges as valuators may still have to consider multiple scenario analysis to capture the growing uncertainty in the next 18 to 24 months.

Organisations can value their business using other methods as well. However, additional considerations need to be applied in doing so. For example, if a company was using the market approach of valuation earlier, it needs to make relevant adjustments in the financial parameters now. It may not just use an average of the previous three or five-year period, as it may not be applicable in these uncertain times. So usage of previous years’ financial metrics during these times needs more analysis and adjustments.

Cash flows and the ability of a business to continue its operations and generate cash flows are important for business valuation. In addition, cash balance and the rate at which money is being used by an organisation also determine its survival and ability to continue doing business. So any changes that help a firm to preserve capital and cash flows, now and in the near future, will help in the valuations as it can give a good idea of how long a company can survive in these turbulent times.

The longer-term prospects of any organisation are also important in assessing its value. However, every dark cloud has a silver lining and tough times help some companies to thrive or re-engineer themselves, like grocery and food delivery, manufacturers of PPE and digital businesses. These and similar other businesses by virtue for their relevance in these times, or because of timely reinvention, are actually booming during the outbreak. With world economies going through disruptions and maybe permanent changes in consumer behaviour, some companies would take advantage of the situation and do better than pre-pandemic times. Going forward, due to the unpredictability of the business environment and future cash flows, valuations cannot be done by just numbers. Stories of survival, tales of flexibility and the ability to either scale up or scale down at a short notice should be definitely part of valuations. Many things may not remain the same in the aftermath of the outbreak. Business processes will change and so should the way valuations of companies are done.

(Writer: Hima Bindu Kota; Courtesy: The Pioneer)

Cabinet decisions on MSMEs and the agricultural economy are well-intended but depend a lot on implementation and sub-text

The Coronavirus and its shape-shifting effect on the economy have been debilitating but the Government has been reacting to them in fits and starts. And while the stimulus packages announced in a series so far haven’t been as stimulating, the Cabinet decisions with regard to Micro, Small and Medium Enterprises (MSMEs) and the agricultural economy are well-intended but depend a lot on implementation and details. The definition of MSMEs has been changed, their turnover limit revised upward to Rs 250 crore from Rs 100 crore. The Government has infused Rs 20,000 crore into the sector as subordinate debt for stressed units. And although the Finance Minister in her first tranche of the stimulus had included Rs 3 lakh crore collateral-free automatic loans for them, many MSME owners claimed that about 97 per cent of them were not in the corporate sector and were either partnerships or proprietorships. So only a minuscule number of firms, that were either private limited or LLP,  benefitted. Besides, this badly-hit sector, which contributes up to 30 per cent of the GDP, has not quite recovered from demonetisation and many units are almost on the verge of closure. And for all the detailing, the fact of the matter is that credit channels like banks and NBFCs will have to ease loans to this sector no matter what the Government says. Even now, MSME credit is a very small percentage of total outstanding bank credit and that pie was declining even before the pandemic, decelerating industrial growth. The proposed fund of funds would help list MSMEs on stock exchange, hoping it would encourage private sector investments in them. But without good ratings and financials, that would not deliver immediately. Farmers, too, got some incentive in the form of a hike in Minimum Support Price (MSP) for 14 crops, which will be 50-83 per cent more than the cost of production. But the Government’s loan facility to them (Rs 3 lakh with a two per cent interest subvention) and the credit scheme for street vendors still do not address the dire need for fund infusion. Of course, more decisions guaranteeing farmers’ incomes, encouraging crop rationalisation and making agri-business investment worthy are expected like getting rid of the Agricultural Produce Marketing Committee (APMC) Act and facilitating easy inter-state trade for farmers. They are currently bound to sell agriculture produce only through APMC mandis, which restrict the free flow of farm products and lead to cartelisation. Though APMCs were meant to protect farmers from commission agents and middlemen, over time they embodied the very ills that they were meant to cure. But to their credit, they did ensure a steady procurement of foodgrains to avoid our food crises. So though farmers may have free market benefits, dismantling a regimented procurement structure would have to be followed up by creating an efficient marketing and distribution system that does not compromise our food security. Free market policies may not look at such altruistic priorities as creating a buffer. Yet we must remember that at least our surplus food reserves helped us somewhat during an emergency brought about by the pandemic. The dairy industry would be a good comparison. With private dairies refusing to buying extra milk produced, only cooperative dairies picked it up and converted it into other milk products, thereby easing the pressure on dairy owners. The Kerala Cooperative Milk Marketing Federation is even providing free milk to migrants to take care of the glut in supplies. Also, over 90 per cent of our farmers do not have access to regulated markets, so dismantling them wouldn’t really have a cascading impact. A better bet would be to widen a network of well-distributed mandis and invest in longer shelf life of produce by way of attendant infrastructure like cold chains, storage, grading, transportation and so on.

Also, many of these measures were intended and discussed before to revive a slowing economy and are not particularly a palliative to the pandemic. We still have a slowing GDP to take care of and that will need big bang reforms and a fund infusion in the short run. Second, this year’s GDP projection has fallen to 4.2 per cent and a consistent downward revision of growth means that figures aren’t sacred. And for all the push to the agricultural sector, nothing is being done to generate demand in urban hubs or tackle joblessness without which no reform would make sense. Our manufacturing and construction growth is almost flatlining and certain sectors are just not being considered for incentivisation. Till this piecemeal approach continues, no matter how reinvigorating each is, there is no rescuing the economy.

(Courtesy: The Pioneer)

Venture capitalists are seeking stronger deal terms as the leverage has shifted back to investors during the pandemic

The countrywide lockdown has dealt a severe blow to the economy of the country. The consequent fall in stocks, which in turn has affected the private equity (PE) market, has resulted in conspicuous devaluation of companies. Start-ups are currently in a strong presence of leverage on the side of investors as the weakness in the market has led to a fall in fund-raising by 78.6 per cent as compared to last year. In such a scenario, it is smart to conserve energy otherwise expended in fund-raising to manage liquidity and the current cash flow. As monetisation of assets through exit activities will see a consequential hold before their prices recover and economic activity returns to normal, investors will want to protect their assets through insertion of restrictive covenants. Owing to the pandemic, venture capitalists are seeking stronger deal terms as the leverage has shifted back to investors.

For the purpose of hedging the risk that presents itself during this time, it is important that both the investors and the start-ups cooperate to maximise efficiency and solve the liquidity crisis that has hit the market currently. The contractual clauses so drafted depend upon the factual matrix of each start-up, made up of the bargaining power of either side. Often, it is a tussle between either side to include clauses that are more favourable either to the start-up or the investor. Such bargaining power resides in the potential of the assets that the start-up creates. There is an inverse relation between the strength of the company and the bargaining power of the investors to introduce such clauses that hedge the risk faced by the lender at the cost of the company. For those companies that are doing well amid the Coronavirus pandemic, these investor-friendly terms come up less. The strongest companies don’t see those tough provisions.

Such methods that hedge the risk by cannibalising the control of the start-up and inserting provisions that dilute the risk for the investor are detrimental to the relations between the two parties. Mostly, the survival of the firm shall be determined by various factors. Among them is the low burn rate through liquidity, adaptability and the basic strength of the start-up and its baseline health before the pandemic hit the world.

However, unique times require unique solutions and the same is reciprocated by legal measures so sought to reflect the mood of the start-ups and the venture capitalists. Conservative measures are on the rise across various industries to either protect the existing values/assets or to drive the economic activity up once the lockdown ends. Therefore, the conservative protective clauses that were prevalent during the dotcom phenomenon are rising again.

Full ratchet anti-dilution protection: This prevents the dilution of the shareholding of the investor in different scenarios. It is a form of protection against the dilutive events that the companies might face, as it completely protects the value for the investors by new stock issues at a price that is lower than the investor’s original investment. It changes and updates the price of conversion in order to maintain the investor at the same level of ownership stake in terms of the percentage owned.

Liquidation preferences: This gives one class of shareholders the right to be paid back first in the event of an exit. Though investors exiting during this time period will be exceptionally harmful but the fact remains that many firms will not survive this pandemic. Then in the case of exit by the investors such a provision would be an area of conflict, especially in this scenario.

Pay-to-play provisions: This enables a firm to penalise investors that don’t invest in later rounds. It is done to assure an investor that his/her firm isn’t the only investor in future rounds.

Pull-up provisions, discounts on bridge loans: Similar to the pay-to-play provisions, these are designed to provide a strong incentive for existing investors to participate in future financing.  Heightened rewards are only affirmative of the unequal bargaining power of the investor against the start-up.

Blocking rights on exits: This gives investors more control of a company so that they can block an acquisition of a firm. This can be used if an investor thinks his/her firm isn’t making enough money in an exit.

At this stage of the Coronavirus pandemic and its resultant impact on the economy of the country, it is imperative for the investors and the firms to amicably cooperate in order to effectively guide the firm out of troubled waters. The devastating effect that the pandemic has had on the bottomlines of firms, especially start-ups is not something that can be wished away overnight.

It will take a concerted effort, on the side of the investors, the start-ups and all stakeholders to steer companies out of the current storm. More measures aimed at reinforcing the moral fabric of the company by providing the right treatment to the employees should be adopted and the firm should not be seen as a lamb being fattened up only to be slaughtered at the apt time.

(Writer: Sonam Chandwani; Courtesy: The Pioneer)

Self-reliance in defence could have the best advantages for us as, besides the economic benefits that will accrue, it will also result in strategic independence, which is a key ingredient of national security

Every war brings death and destruction in its wake. It also opens windows of opportunities for those who seek it. Though the global war on the COVID-19 is by no means over it has brought a host of opportunities with it. So, do we Indians continue to remain in the abyss of poverty or do we take a plunge into the new world that is opening up? It needs to be remembered that in the past, India was a leader in manufacturing. As per William Dalrymple’s book The Anarchy, in 1608, India “was producing about a quarter of global manufacturing; indeed in many ways it was the world’s industrial powerhouse and world’s leader in manufactured textiles.” Whatever happened thereafter is history and during the British rule, India lost the leadership role in manufacturing. We missed the Industrial Revolution and it had a telling effect on impoverishing India.

Thankfully, we did catch the train of Digital Revolution but the gains were not inclusive enough to pull us out of poverty. The opportunity that the COVID revolution is presenting needs to be grabbed with everything that we have. As Prime Minister Narendra Modi put across to the country, his vision of “Atma nirbhar (self-reliant)” India and rolled out financial packages to support the vision, many opportunities could open up, particularly in defence production.

India is one of the biggest arms importers in the world. In 2013-2017, India topped the list as it accounted for 12 per cent of the world’s arms imports. The US was the highest arms exporter amounting to 34 per cent of the global share. Even Netherlands, which is 79 times smaller in size than India, was the tenth-largest exporter of arms, accounting for 2.1 per cent of the global arms exports. Surely, a renewed Make in India will provide the country with unparalleled benefits. Self-reliance in defence could have the best advantages for India, as, besides the economic benefits that will accrue, it will also result in strategic independence, which is a key ingredient of national security.

Threat perception is mostly what drives force structuring and weaponisation. With the break-up of the USSR, the threat perception reduced significantly and it was possible for some European nations to scale down their armed forces. However, in the Indian context, the perceived threat from the Northern and Western neighbours does not appear to be reducing in the foreseeable future. While the spectrum and type of conflict that may manifest can be debated, what is of importance is that the preparedness has to be long-term in the interest of overall national security.

Though there has been indigenisation in the field of defence production for the last decade, its output has obviously not been as desired. Also, in terms of quality, there have been instances of the product not being suitable for combat conditions. One can take the case of the INSAS rifle with problems of moving parts and magazines. Time taken for developing a product is also important — as in the case of MBT Arjun.

Indigenisation for defence is simply not “Made in India” or “Manufactured in India.” To be successful, “Make in India” has to include the entire process and this includes: Identification of the weapon or equipment or platform to be manufactured; technology; design; patent/IPR and related issues; manufacturing ecosystem and operational maintenance and logistics.

Identification of the weapon/equipment/platform: Based on the threat perception and a long-term integrated plan, each weapon/equipment/platform is to be decided. This is an important process, needing strategic perception and long-term capability development and would be in the realms of the armed forces, with inputs from sources as desired by them. The process also includes formulation of General Service Qualitative Requirements (GSQR), which need to be realistic while meeting the operational requirements of the armed forces.

I am reminded of the days when I was serving in the Siachen glacier, in one of the most challenging posts, in 1992. Since our post was on an ice-wall and was partially under enemy observation, the helipad was located some distance away. Due to the restriction of the valley width as also very limited availability of landing ground, only the smallest helicopter, the Cheetah (French Allouette engine) could fly there. In its first sortie, with full fuel load, all that it could carry was either one man without his equipment or his equipment or a jerrican (20 litres) of kerosene oil.

I wondered at that time as a young Major, that, whereas a sizeable portion of our army is deployed in high altitude and super high altitude areas, why is it that we don’t have an Indian helicopter to meet our operational requirements? Through “Make in India,” we can achieve to get what we need for our operational conditions and not what some other country wants to sell, which could be quite unrelated to our requirements. No other country would be fighting wars in the varied terrain and other conditions that prevail along our borders.

Technology and Design: For the success of “Make in India,” the process of technology and design would probably be the most significant one. This applies equally to both, i.e. platforms made by large industries or smaller sub-systems manufactured by MSMEs. Technology must drive the equipment to be unfailingly combat-effective, be it a platform like the aircraft carrier, an aircraft, main battle tank; or a small part like the magazine of a rifle; each needs combat-worthy technology. Fortunately, India has enough technology experts in this field but their expertise needs to be harnessed in a highly organised manner.

A conducive ecosystem needs to be created, wherein they can contribute to national security as a matter of pride, while their individual aspirations are also taken care of. There is also a need to harness Indian technology experts who may have moved to the US/Europe or other countries, giving them the option of repatriating, including those who may have lost their jobs in the current situation. Alternatively, they could work on a project basis in India. An opportunity can thus be created for them to “give back” to their country which, in a large number of cases, would have given them basic education to achieve success.

There are, of course, products utilising very high-end technology, which may not be readily available. There is a need to acquire such technology leveraging India’s other strengths. For the long-term success of “Make in India,” such borrowed/acquired technology cannot be an answer. Dedicated investment must be made on R&D of short and long-term defence equipment requirements, taking advantage of the technology experts of the entire country, on a project basis. Such research projects and their byproducts could also be utilised for civilian purposes, in the long-term.

Patent/IPR: All existing patent/IPR rules/regulations must be fully implemented. Excellence/innovation needs to be honoured and rewarded. Even individual interests of scientists, where applicable, in relation to patents must be respected. Clauses of national security, where desirable can be enunciated.

Manufacturing Ecosystem: With the “Make in India” friendly packages announced by the Government, including items that cannot be imported, both large industrial houses and MSMEs have an unprecedented opportunity. However, to compete, their standards have to be really world-class. For long-term success, the manufacturing capabilities need to be upgraded where required, to supply fail-proof combat equipment. Promising manufacturing units, including start-ups, could be provided appropriate efficiency and output-based support.

Operational Maintenance and Logistics: In the varied terrain conditions that Indian Armed Forces operate in, including a major portion in high altitude and super-high altitude areas, operational maintenance and logistics would play a significant role. In situations where feasible, the original equipment manufacturer could take on the responsibility of logistics and sustenance. The design of the weapon/equipment must take into consideration the requirements of field maintenance in extremely challenging situations and terrain.

The 21st century has presented India with an unique opportunity, which could fulfil the requirements of inclusive growth as well as meet many other existing challenges. Through ‘Make in India’, the country gains strategic independence, the industry makes progress, jobs are created and most importantly the soldier gets indigenously-manufactured equipment meeting world standards.

(Writer: Aniruddha Chakravarty; Courtesy: The Pioneer)

A FEASIBLE AND INNOVATIVE APPROACH TO REFORM, RESTRUCTURE JOBS & ALTER ECONOMY AFTER COVID-19 LOCK DOWN BY MITIGATING THE RISKS AND CHALLENGES

Problem Statement and Background: As soon as LOCK-DOWN 2 was announced by the Prime Minister, restless work force of migrant workers started to panic. It served an alarm that it’s beyond our tolerance limits to stay safe and cool at the same time by confining ourselves within four walls. Though PMO seems to be practical with relaxation norms for essential service sector and other sectors of importance with subject to the projected increase in positive cases and spread of COVID-19 across India.

Intellectuals, CEO’s of larger corporate organizations, economists, businessmen and experts have started discussing and debating on post world scenario after COVID-19 lock down on national economy with after effects on demand and supply cycle. As most of the economists project GDP growth for 2020-2021 between 1.8-2.7% for India, if this is assumed to be true then the lower and middle strata of society will be greatly affected. However, so called experts have potentially failed to visualize the “structural reforms” with available resources in both government and private sectors for the purpose of improving productivity and utilization of workforce with prime focus on new-job creations with improved services to wider community who are the backbone for 5 trillion economy. Authors have put honest efforts to visualize the same and explained in brief how to protect and save common man’s “bread & butter” without significant losses to SME and MSME sectors. The approach discussed in this article covers the logical feasibility and approach to a faster economic recovery and bringing the economy back in track without hampering the interests of all strata and sectors of the pyramid economy.

Present Scenario

GOVERNMENT SECTORS Including all central, state, PSU’s, banks, insurance, education, national research laboratories, railways and public transport. Under any catastrophic or epidemic event, public servants, bureaucrats, police personnel are empowered and mostly result in imbalance of power to serve “common people”. There is another class of NGOs who also collects funds in the name of the poor to provide relief and preliminary measures to bring back their routine life on track. This situation normally affects the state and nation beyond any boundaries of caste, creed, class and economics. As a result collateral damage is in the form of loss of lives, livelihood and jobs for time being. This is a result of utilization of public services and their manpower utilization.

PRIVATE SECTORS including manufacturing, organised, unorganized hospitality, retail, aviation, daily needs, essential services, supply chain, blue collar and daily wage workers. Most of the unorganized private sectors core are migrant and daily wage workers whose livelihood and earnings depends the productive days in a month, without any substantial savings and with hardships to sustain and survive and to meet their ends results in frustration and agitation. With a circular economy at halt and near to zero demand and supply, results are quite evident on people and economy. Nothing is above human life and the objective of lock down due to COVID-19 is to safeguard citizen of nation which supersedes the economy.

Major Issues Which Arise Out Of Catastrophic And Epidemic Events : 

• Delayed Normalisation: It takes substantial amount of time to normalise with backlog and same workforce, which results in a nightmare for common man to get the benefits and get things done on time [such as government scheme benefits, legal matters, documentation etc]
• Demand and Supply uncertainty: Fear of stock outs and non-availability of essential items due to cash flow, non availability of labour, lack of enough raw material and resources. It also impacts the household budget and creates a sense of fear among lower and middle class strata due to constrained budgets and cash flow. It also impacts the academics and education.
• Government budget gets totally haywire due to a jolt in economy and impaired export and deficit as priority is on severance and subsidies under various schemes to compensate the loss of livelihood. As priority changes, will disturb GDP performance and as a result the capital market sinks to the lowest level with longer recovery time.
• All possibilities exist about administrative irregularities in allocation and utilization of supportive resources made available under disaster management actions.

MAJOR CRITICAL REASON ANALYSIS ON ABOVE REFERRED ISSUES FOR POOR PRODUCTIVITY

• There is no provision of stand by govt service platform availability under normal working days. During disaster periods such platforms are more or less out of function, so pending workload increases and govt fails to satisfy the common man’s.
• Normal working hours of govt employees or private sectors as per norms is 8 hrs per day, inclusive of lunch and tea breaks ( 45 min to 1 hr/8 hrs work ). It is extremely low to meet the expectation during any crisis.
• Productivity variation in efficacy of govt offices, due to prolong break period than prescribed, along with late opening and early closing windows directly offers great dissatisfaction to the common man. It is also a fact that about 75-80% class III/IV employees are engaged in additional activity to generate additional income [share market, Insurance/postal services agencies, etc]
• Efficiency variation during recession break period are varied however industry have to managed efficiency till end of the shift. As per factory act norms, minimum labour efficiency acceptable is 80%, means productivity will greatly vary.
• It is observed, both in government & private sectors, officers cadre work more hours than class III/IV level cadre.

INNOVATIVE SOLUTIONS TO ABOVE ISSUES AND TO IMPROVE BETTER PRODUCTIVITY:

20 to 25% time loss per shift per employee, just in lunch & tea breaks is the mindset to enjoy more time than permitted, particularly in government sectors and in private sectors permissible and acceptable minimum efficiency level [such norms missing in govt] directly impacts on productivity per unit cost of a product / service offered. Deep thoughts are given to eliminate non-productive contributing factors, how unnecessary and indirect breaks can be eliminated through restructuring system norms, keeping in mind following objectives

• To offer job profiles, which have minimum potential to sustain a family of 4 [2+2] with salary/wages.
• To create additional jobs, to offer more hours working government service platforms for common man.
• To promote self employment culture by the way of limited fixed income under flexible hours job opportunities.

FOLLOWING REFORMS ARE SUGGESTED TO IMPLEMENT

• Restructuring the present system of time schedules from 8 hrs working to 6 hrs working without affecting present way of working in terms of methods & PERFORMANCE measurements.
• Only one tea break in 6-hrs working schedules.
• Government platforms in service sectors and involved in public dealing to be run in TWO shift working like schedules of secondary schooling. for e.g. Ist 7am to 1pm & IInd 1.30pm to 7.30 pm.
• Officer cadre to work 10-12 hours as usual and to monitor both shift.
• Salary/wages to be reduced as per revised framework of working i.e 20-25% in Basic Pay.
• For running two government funded shifts, all service platforms will create new jobs equivalent in the numbers of available employment in the sectors. [12-15 crores employment class III/IV].
• 50% post as per earlier point, recruitment to be done on central platform with financial burden and till the period of establishment. Later on burden can be transferred to respective state authority.
• 50% post to be filled up under the scheme of learning with earning for the students of higher education as an “Internship with stipend” by the respective state authority with financial support by central government for initial couple of years.
• For industries shift timings 4 shifts per 24 hrs running industries should be allowed. MSME assumed to be running two shifts between 7am to 30pm.
• Wages/salary to be re fixed as new schedule timings as per their policy matter. Government may extend financial support to sustain new recruitees in similar way as referred above and as per organization policy. 50% vacancy to be filled up as per government apprentice act [financial support by central govt]
• With 60% industrial sickness rate on registered 6.5 crores registered MSME having average employment labour force 15 /MSME can create and offer 10 Crores+ of additional jobs.
• Amendments to Factory Act 1947 and Service rules applicable to govt employees to be made by the concern.

Hence 20-25?ditions in jobs will create at least 20 CRORES JOBS [Present strength of government job is @ 10-12% of population & MSME jobs are 25-30% of population] in government and private sector.

COVID-19 epidemic has put global economy and every individual is suffering, so it is the perfect opportunity to reform existing old system of working and accountability.

CONCLUSIONS

• INNOVATIVE REFORM AS SUGGESTED CAN IMPROVE PERFORMANCE EFFICIENCY OF GOVERNMENT OFFICES AND CAN OFFER MORE HOURS PER DAY SERVICES TO COMMON MAN.
• YOUNG MINDS WILL GET OPPORTUNITY TO SERVE NATION IN DIFFERENT WAYS AND MEANS. IT WILL EDUCATE PRIVATE SECTORS ON MANPOWER UTILIZATION.
• UNDER ELIMINATION OF NON-PRODUCTIVE TIMINGS INDUSTRY COSTING WILL REDUCE AND BETTER PRODUCTS CAN BE ACHIEVED.
• EMPLOYEES [III/IV CLASS]DOING SIDE BUSINESS WILL GET NOW MORE TIME TO INCREASE THE BUSINESS SO MAY CREATE NEW EMPLOYMENTS AND UNDER FREEDOM OF WILLINGNESS TO CHOICES OF WORK CONTENT WILL LEAD TO REDUCTION IN EVENTS OF MIS-ADMINISTRATION.
• HAWKERS/LARIWALA BUSINESS DEPENDENTS ON SUCH GOVT SERVICING PLATFORMS, NOW WILL GET MORE BUSINESS DUE TO INCREASED TIMINGS OF GOVERNMENT.
• THERE IS NO NEED TO WASTE OFFICIAL LEAVE FOR OWN NEED OF GOVT SERVICE PLATFORMS FOR ANY EMPLOYEES EITHER GOVT OR PRIVATE SECTORS DUE TO TWO SHIFT RUNNING GOVT SERVICE PLATFORMS.MINIMUM 3-4 LEAVE WASTAGE REDUCED PER EMPLOYEE, HOW MANY HRS MORE WORKING MADE AVAILABLE ON TOTAL SCALE OF EMPLOYEES IN NOS. AN IMPORTANT BOOST TOWARDS ACHIEVING 5-TRILLION ECONOMY.

Inputs from the following experts Dhiren Shah / Dr Dhananjay Bhatt / Arvind Jain and contact email are in respective order sunsmidhi@gmail.com / drdvbhatt@gmail.com / arvindjani69@yahoo.com

Blended finance combines public sector and philanthropic monies as catalytic capital to raise multiples of private sector monies, which help scale up the flow of funding to sustainable projects

As sustainability becomes mainstream, it is becoming a well-acknowledged fact that the planet just does not possess the resources required for us to maintain our current consumption patterns and emulate the aspirational lifestyles of the West. The estimated growth in global population to 10 billion in the not too distant future is an added headwind. This situation has meant that driving efficiencies in resource usage is fast coming into public discourse to reduce the carbon footprint. This is translating into necessary assets that would need funding. Such examples abound, like fuel-efficient cars, migration of public transport to e-vehicles, high-speed rail in place of airlines, urban Mass Rapid Transit trains substituting fuel-run vehicles, micro grids for far-flung communities instead of diesel generators and so on.

While these assets, which are typically part of large-scale transformational projects, are funded either by the Government or by concessional loans from development financial institutions, public capital is not going to fulfil the need for the trillions of dollars of investment the planet requires to scale up projects that would usher in the desired sustainability goals.

However, the biggest challenge to bringing  private capital at scale is the fact that most projects do not offer commercially-viable returns, owing to high upfront costs, long payback, remote location of some projects, nascent technologies and in certain cases, political uncertainties, weak institutional frameworks and so on.

This is where blended finance has come up as a solution in this context. It combines public sector and philanthropic monies as catalytic capital to raise multiples of private sector monies, which help scale up the flow of funding to sustainable projects, while yielding substantial economic benefits to all stakeholders.

The blended finance structure addresses the projects’ perceived risks, thereby helping increase the size and number of funding opportunities. It comprises funding, which may or may not be concessionary, supported with one or more elements like guarantees, political risk insurance, performance insurance, outcome-based funding, interest subvention, concessional or off-market local currency hedging, project preparation grants and so on.

This combination makes the projects’ terms viable for private sector capital and for the project developer, who otherwise may not have met the criteria without the assistance these supporting mechanisms bring in.

Among the emerging markets, India is leading the way by developing successful blended finance models. These are worth emulating in other markets that have a similar development profile as India in order to bring blended finance to a global scale.

In India, the Government’s Viability Gap Funding (VGF) model is one such success-story. Launched in 2004, it supports projects under the Public Private Partnership (PPP) mechanism. VGF grants were made essentially for infrastructure projects where private sector sponsors were selected via competitive bidding. The grant was disbursed at the construction stage after the private sector developer made an equity contribution towards the project. This grant is typically 20 per cent of the project’s capital cost and is allocated from the Government’s budget.

The Government then went a step ahead by defining the norms of how VGF would apply to utility-scale renewable energy projects, specifying the role of the Solar Energy Corporation of India in terms of evaluation, disbursement and monitoring.

Another example is that of cKers Finance and Rockefeller Foundation. Inked in 2018, their partnership involves an investment by Rockefeller in the Delhi-based sustainable energy Non-Banking Financial Company (NBFC) to build a $50 million asset financing portfolio for scaling up India’s decentralised renewable energy segment (DRE).

The Rockefeller investment would help cKers provide funding access at reasonable rates and terms to build the sustainable energy portfolio about 10 per cent of which would be in mini-grids. While the national grid has reached almost all places in India, the quality of supply remains erratic and thus DRE solutions like micro and mini-grids hold value.

Then there is the US-India Clean Energy Finance (USICEF) programme, which supports distributed solar power projects through grants specifically for early-stage project preparation support. Managed by the Climate Policy Initiative, it is a partnership between India’s renewable energy ministry, the US’ Overseas Private Investment Corporation (OPIC) and others. Developers apply to the USICEF, which maintains an empanelled list of service providers (legal and professional services consultancies and so on) and engages them with the grant.

The project preparation support makes these developers investment-ready to raise funding from OPIC and other like-minded firms. The average grant is only about $0.1 million or so but this is a significant challenge for the developers given their small scale and the limitations they face in resources and talent acquisition.

This programme, with a total $3.5 million grant committed so far, has supported several rooftop solar, small ground-mounted and solar home system projects across more than a dozen Indian States. Last is the “pay for success” outcome funder model. Grameen Impact Investment, a Mumbai-based impact NBFC, launched social impact bonds addressing women’s livelihood and empowerment, youths’ skill-development and clean energy. Corporate Social Responsibility (CSR) spending by organisations in India has risen exponentially in recent years, mostly towards health and education. However, India’s Human Development Index score, which includes mostly health and education indicators, has hardly improved.

While CSR is only one component of India’s social sector spending, this does give some indication that actual achievement of outcomes is perhaps found wanting at times. The outcome funder model attempts to close this gap. The pre-defined outcome metrics are independently verified by third-party evaluators for on-ground achievement, only upon which the outcome funder (a philanthropy or CSR fund) would meet the enterprise’s interest and/or principle obligations — thus “pay for success.”

This ensures that the philanthropic resources are leveraged in a manner that will help achieve outcomes far more than what direct spending could possibly do.

Other blended models abound globally, each of which can potentially be replicated in India. The US-India Catalytic Solar Finance Facility used catalytic, first-loss capital to create risk-mitigation facilities. The Grid Solar Fund, which funds off-grid solar companies, raised $10 million in political risk insurance from OPIC to attract investments from the private sector.

Climate Investor One Fund raised blended capital at about 1.7 times multiple with a tiered-structure, which bifurcates capital into first-loss, subordinated equity and debt with credit guarantee to make lenders comfortable. Denmark’s Climate Investment Fund raised blended capital at over 1.7 times multiple, by using a preferential model where losses are shared equally by public and private investors but the latter enjoy a preferential return and a catch-up option.

At the same time, a preferential model based on share classes was less effective. The Global Energy Efficiency and Renewable Energy Fund, which paid principal and interest in batches between its A and B share classes, could raise blended capital only at about 0.8 times multiple.

Models apart, another merit of blended finance is that it can cover areas traditionally unserved by conventional funding, like US’ Prime Coalition, which invests in early-stage clean energy technologies, the Africa Clean Energy Facility, which focusses on project preparation and expects to raise a multiple of about 20 times its grants and IFC-GEF’s China Utility Energy Efficiency Programme, which helped local banks lend for energy efficiency.

Blended finance can also mobilise commercial bank participation as seen in Dutch bank FMO’s Guarantco that grants partial credit guarantees to local banks, Indonesia’s Sarulla geothermal project that used a political risk guarantee from Japan’s JBIC and a guarantee letter from the Indonesian Government to bring in commercial bank funding, German KfW and ResponsAbility’s Global Climate Partnership Fund that refinances green lending schemes of local banks or Africa Development Bank’s Facility for Energy Inclusion that combines commercial capital for small-scale energy access projects.

In the end, compulsions like climate change, greenhouse gas emissions, substituting the import cost of fossil fuels and driving economic growth through “green sectors” will necessitate an urgent scale-up in sustainability projects. To achieve this, innovative mechanisms to raise dedicated green capital will hold the key, especially as Indian banks cannot always fund the long maturities that sustainability projects entail. While blended finance cannot solve all the issues, it can certainly address some of the barriers. The models discussed in this article have already shown demonstrable value which makes them worth emulating. Most of them can be potentially replicated and scaled up further to fund India’s multitude sustainability challenges. Emerging markets with similar challenges to India should also take note.

(Writer: Sourajit Aiyer/ Sandeep Bhattacharya; Courtesy: The Pioneer)

The only way to come out of the looming economic crisis is to have large-scale direct cash transfer at least for the next six months to boost demand. This in turn will generate jobs and increase consumption levels to bring the country out of the trough it is in now 

India is facing a humanitarian and economic crisis of epic proportions. As a result of the extended lockdown, millions of hungry and penniless migrant labourers are stranded in cities, desperately waiting for a seat on a bus or a train to take them home. Fed up of the endless wait, the “atma nirbhar (self-reliant)” among them decided to take matters into their own hands and began walking back to their hometowns and villages, hundreds of kilometres away.

These workers, who form the backbone of the informal economy of the country, are generally employed in Micro, Small and   Medium Enterprises (MSMEs), restaurants, retail shops, construction sites and other enterprises which shut their doors during the lockdown or are at the brink of closure, due to it. What a lockdown of over nine weeks would do to the economy of the country and consequently, the lives of daily-wagers is not beyond the scope of the imagination of those who are in touch with reality.

The so-called Rs 20 lakh crore economic package was an exercise in futility, which did not offer anything to the struggling migrant workers. Instead, the Government announced measures to make it easier for Indians to travel to space. Perhaps, the Government got it wrong. People want to travel to their States, not space. Most analysts, rating agencies and banks have placed the size of the fiscal stimulus announced by Finance Minister Nirmala Sitharaman between 0.7 to 1.3 per cent of the Gross Domestic Product (GDP) and not 10 per cent as claimed by the Government. According to the Government’s own admission, a Rs 8.01 lakh crore liquidity infusion by the Central bank forms a part of this Rs 20 lakh crore stimulus.

The outcome of the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) meeting, which decided to cut the repo and reverse repo rate further by 40 basis points (bps) to four per cent and 3.35 per cent respectively, came as no surprise. The consecutive rate cuts by the RBI are aimed at injecting more liquidity into the market. However, the industry and retail borrowers are not going to benefit from this rate reduction as there is no demand for credit. And for banks, liquidity is not an issue right now but risk aversion is. This risk aversion among banks is creating a hurdle in increasing credit flow and ensuring the transmission of rate cuts to the industry and retail borrowers. But these rate cuts will affect the middle and lower-income classes the most, with an expected fall in interest rates on their savings (Fixed Deposits) by around 0.5 per cent in the days to come.

However, banks alone cannot be blamed for turning cautious on lending. The economy is passing through uncertain times and banks are trying to prevent non-performing assets (NPAs). The primary issue is the absence of demand for liquidity and to generate this demand, capacity utilisation, which was 68.6 per cent (October-December 2019), has to be increased. Here comes the immediate need for additional Direct Cash Transfer of Rs 7,500 to each Jan Dhan, PM-Kisan and pensioner’s account. This transfer will generate demand in the rural and semi-urban sector, which in turn would force India Inc. to use the remaining 31.4 per cent capacity or go for capacity enhancement which may require liquidity support from banks. Just increasing liquidity in its current form by the RBI is not going to translate into higher credit offtake.

Another major announcement by the RBI was the extension of the moratorium on loan repayment by another three months. The RBI also announced the conversion of moratorium interest payment into a term loan, payable in the course of the Financial Year (FY) 2021. These measures could bring relief to borrowers but not for banks, as they will see more pressure on their balance sheets. The Government should ensure that in the endeavour to become atma nirbhar it does not end up making our banks and Non-Banking Financial Companies (NBFCs) “parmatma nirbhar (dependent on God).” In the last few years, we have already seen some examples of this in the likes of PMC Bank, Yes Bank and so on.

Another challenge for the country is the consistent increase in the food inflation rate. The unplanned lockdown resulted in major supply chain disruptions, which in turn increased the food inflation rate to 8.6 per cent in April. If proper planning regarding supply chains is not done before reopening the economy, food inflation will skyrocket. If food inflation does not decrease, we will have an economy with a high inflation rate and negative GDP growth.

Although the RBI has not provided any concrete number for the projected GDP for FY21, it predicted a negative growth rate. Already a few national and international rating agencies have forecast a negative GDP growth rate (minus five per cent), which can also have huge fiscal implications for India.

The only way to come out of this difficulty is to have large-scale direct cash transfer at least for the next six months to boost demand. This in turn, will generate jobs and increase consumption levels. Thereafter, our demographic advantage will accelerate the economic wheel of the country.

(Writer: Gourav Vallabh; Courtesy: The Pioneer)

The impact of Coronavirus on commercial real estate will be interesting, primarily because none really knows the future

As the Coronavirus pandemic began spreading its tentacles out of China and to the rest of the world in the middle of March, offices and malls began clearing out.  People became genuinely scared of contracting the virus. Now, as the world is gradually beginning to lift the lockdown, the commercial real estate sector is just about picking up the pieces. Nobody really knows what the future will be. Take the example of movie theatres.  One among the single-largest occupiers of space in malls, the pandemic not only forced the people home, it also drove up media consumption but on streaming services like Netflix, Amazon Prime and Hotstar. And while streaming services always showed movies soon after the release, several Indian movies scheduled to be screened around the Eid time-frame, a major marketing opportunity, have moved straight to streaming platforms. An angry and petulant letter by one theatre chain will not change studios from adopting this practice. Going back to the movie theatre or indeed the mall will need confidence to come back to the consumers. As e-commerce players restart deliveries of “non-essentials,” we could find ourselves spending even more time at home.

Then what about offices? Not only will several organisations, small and large and previously profitable, find themselves on the verge of bankruptcy at the end of the pandemic, they may also give up their expensive office rental spaces. Other organisations may have noted the success of the “work from home” culture started by the virus, which may as well lead to a re-evaluation of the amount of space  they actually need in a building. But some operations, which need physical presence of employees, might end up needing more space as the need for distancing might mean more floor space is required. The usage of “hot-desking,” where employees can use any free space, has been banned in several Western countries, but it may well be followed in India for hygiene reasons. This could lead to more space being needed. The overall impact of the virus on real estate may, therefore, not be all negative. However, with the entire economy stressed and short-term impact of less office space being needed will lead to less buildings being occupied. For a sector that was already teetering on the edge, the virus is proving to be deadly. Far deadlier than it actually has been on humans.

(Courtesy: The Pioneer)