Covid-19 triggers a century-long crisis; economy could contract in FY21: Kumar Mangalam Birla

NEW DELHI: Hindalco Industries President Kumar Mangalam Birla said Covid-19 and associated lockdowns have triggered a once-in-a-century crisis for society and the economy and the country’s GDP could contract in 2020- 2021. He mentioned that Covid-19 hit India at a time when underlying economic conditions were moderate due to heightened global uncertainty and stress in the domestic financial system.
“It is estimated that around 80% of India’s GDP comes from districts that were classified as red and orange zones during the lockdown, where economic activity remained severely limited. As a result, India’s GDP is expected to contract in FY21, which would be the first such example in over four decades, ”Birla said in a letter to shareholders.
Given the fog of uncertainty all around, it’s hard to be prescient in these times, Birla said. A strict national lockdown to slow the spread of the pandemic began in the last week of fiscal 2020 and remained active to varying degrees in different geographies for most of the first quarter of 2020-2021.
“But there is little doubt about a reality: Companies with quality leadership, strong business fundamentals and a track record of victories in times of turbulence will become champions of the new world order,” a- he declared.
This year will see an economic contraction, but this 2020 recession turns out to be very different from previous recessions, Birla said.
“It was too sudden – almost fell off the cliff; its spread has been global – affecting almost all economies and sectors, and the fall in levels of economic activity and employment has been unprecedented,” said he declared.
On the bright side, this recession will likely be one of the shortest, assuming no second wave of the pandemic recurs. As the current bottlenecks around the world are lifted and businesses reopen, economic activity is expected to rebound fairly quickly, he said.
“About $ 9 trillion in stimulus from various governments around the world will help support this recovery, along with the monetary actions of central banks. These policies will also help limit second-order effects like defaults and bankruptcies. bankruptcies, ”Birla said.
Some scars of the crisis will remain in the form of moderate consumer and business confidence. Some industries, such as airlines and hospitality, will take time to fully recover. And some supply chain disruption effects will persist.
As the world emerges from the current crisis, the coming years should be marked by a lack of dynamic growth, low commodity prices and inflation, a cautious trend in project investments, increased risks of de-globalization and political uncertainty; and the increased reliance of financial systems on ultra-relaxed monetary policy conditions, Birla said.
“We will also need to pay attention to potential post-Covid changes in consumer behavior (such as more virtual engagements) and organizational operating models (such as work-from-home standards, diversification of chain risks procurement, greater use of e-commerce), ”he said.

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