Uncertainty Returns
Business Today|May 16, 2021
Industrialised states like Maharashtra, Gujarat and Delhi have been the most affected in the second Covid wave, resulting in large-scale migration of labour and posing a bumpy road ahead for
The Effect

As of now disruption in production is minimal, but if cases continue to spread like wildfire and a nationwide lockdown is imposed, there could be an inventory shortage across industries

There is already a 15-20 per cent shortage of labour, which is leading to supply chain and distribution delays

The biggest concern is dip in consumption, as people are forced to stay indoors

When Mumbai-based homemaker Vandana Mathur called her neighbourhood grocer to order essentials such as rice, oil and atta last week, she was told they were out of stock. Though the grocer assured her he would deliver the products at her doorstep by afternoon, Gupta was worried. “I started to wonder whether we were in for another round of lockdown-related supply crunch,” she says. Later in the afternoon, Mathur’s grocer did deliver her order as promised, but also warned her to be prepared for delays since supplies were taking longer than usual ever since Maharashtra announced a lockdown to break the chain of Covid-19 infections.

The second wave of Covid-19 is spreading like wildfire, forcing state governments to impose mini lockdowns. Like last year, retail (barring essentials) has already come to a grinding halt in many parts of the country with malls and high-street stores forced to pull down shutters. Ecommerce majors are allowed to deliver nothing but essentials, while restaurants can only do home deliveries. Construction activities have come to a halt as well. Some of India’s most industrialised states like Maharashtra, Gujarat, Delhi and NCR, are, in fact, some of the most-affected regions, and local lockdowns could have an equally debilitating and disrupting effect on industries. So, is the Indian industry staring at another paralysis ahead?

Skepticism Engulfs

Captains of the industry are careful not to press the panic button right away though. With lockdowns announced only till May 1 in most states, many of them don’t want to jump to conclusions. “Unlike last year, macroeconomic conditions are better because governments all over the world are spending a lot on infrastructure. It is too early to comment as the situation on the ground is evolving rapidly. Currently, we are operating according to plan and aim to run our operations safely and efficiently so we can service our customers and stakeholders to the maximum extent possible. We have been reviewing workforce requirement and optimising deployment to ensure safety,” says T.V. Narendran, CEO and Managing Director, Tata Steel.

“Last time, we had no idea of what was going to happen. But, now we are clear about the time for recovery even if lockdown happens,” adds Shekhar Bajaj, Chairman and Managing Director, Bajaj Electricals. However, if Covid numbers continue to shoot up, there would definitely be disruption in production and distribution activities, he warns. “We have enough inventory for April, but not beyond that.”

R.C. Bhargava, Chairman, Maruti Suzuki, is against a lockdown as well. “It does not serve any purpose. It will hurt a lot of people and stopping legitimate economic activity is an over-reaction,” he cautions.

Agrees Martin Schwenk, CEO and Managing Director, Mercedes Benz India. “A short-term localised lockdown will not create major disruptions; however, a prolonged and expanded lockdown will impact customer sentiment, in turn affecting the industry, the supply chain and the overall economy substantially.”

The challenge this time is not so much from the business continuity or supply chain point of view, but more about ensuring the safety of teams. “This time there are no sudden shocks that have happened. A lot of support is there from governments in terms of classification of FMCG as essentials. However, the new wave is hitting closer home and what is worrying is that lot of people from our teams are falling sick,” says Sunil Kataria, CEO, India and Saarc, Godrej Consumer Products.

Production & Supply Disruption

The first wave of Covid-19 brought production and supply chain mechanisms of most companies to an abrupt halt. When the government imposed curbs on the operations of factories and distributors, it led to large-scale migration of daily-wage labourers who suddenly didn’t have a job. This time, companies may be better equipped to handle the black swan event, but state-imposed lockdowns have already begun to cause reverse migration of labourers. There is a 15-20 per cent dip in manpower availability, which is beginning to hit both manufacturing and supply chain operations.

Sridhar Gundaiah, Founder and CEO of rural distribution company StoreKing, says there is a delay in servicing orders by FMCG companies. “Earlier the window to deliver was 7-10 days, but in the last one month most companies are expecting us to place our orders at least 25 days prior. In fact, the problem is not as much in factories as much as it is in functions such as packaging and logistics,” he explains.

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