The Right Restart

The world has almost come to a standstill and as all the spotlight is on Covid-19, I am left with no choice but to welcome Covid into our domain as well. The globe has acknowledged Covid as not just a virus that kills lives but also a pest that disturbs livelihood. Government's first priority should and has been saving lives, but the cost of doing so has proved to be very high. The virus will continue to exist as long as a vaccine is invented. However quarantines cannot continue till then and people must be able to restart their livelihoods at a minimal pace. The virus has shown no bias and mercy, taking even the best billionaires  for a ride.

To quote few examples- savvy investor Warren Buffet who normally enjoys bearish phases is surprisingly silent and reluctant to make new investments. His partner Charlie Munger mentioned in a conference that Berkshire would not reopen all the businesses in it's portfolio. Business tycoon Richard Branson (founder of Virgin Airlines) has seen his net worth drop by almost a billion and a half dollars. He has decided to put up his island for sale to raise funds and clear debts.  Such is the intensity and seriousness of the outbreak. While it is almost impossible for naive businesses to survive this turmoil, its the government's duty to ensure that a large chunk of businesses escape bankruptcy.

Will 1930 repeat itself:

There's no surprise if we face another depression. With demand sinking (making Buddhists happy) rapidly and businesses on their knees, the near future looks foggy. Further with supply chains extending their spread across multiple countries, every country would require the other countries as well to recover from the pandemic. With all these factors at play and our so called efficient governments to add worry to the woes the worst is yet to show itself.

How do we restart:

When and how to restart the economy is a challenge faced by all the governments. It's absolutely vital that they ensure a balance between saving lives and safeguarding livelihoods. The government must have a list of priorities. It is impossible to protect every business and some may have to meet their fate. But crucial businesses in vulnerable industries such as banking, tourism, aviation need and deserve financial support. Policies must be drafted to boost these companies. Traditional methods employed during a crisis such as lowering repo rate may or may not be sufficient. It's imperative that the support extended by the government is strong enough to keep these businesses afloat. Secondly, all businesses would look to minimize costs. In doing so, they would not just try to defer unnecessary capital expenditure but would also layoff a big chunk of their employees. Further, to lower reliance on man power, businesses are trying to automate their business processes. So, the post Covid era may see a surge in unemployment and underemployment. More than two thirds of the business world in India is characterized by small industries and freelancers. They have taken a major blow. It will be interesting to see how support is extended to these informal and unregulated businesses.

The challenge presented in front of the world is tricky and intimidating. As every business is connected and dependent on other businesses supply chain disruptions and thereby modifications are bound to occur. To the extent possible they must try to reduce emphasis on imports and shorten supply chains.

As consumers we have a huge role to play in reviving our economy. In the coming days people would tend to not spend a lot and be conservative. However, we must ensure that we do not become misers in the process.