Long term impact of COVID - 1
Jun 7, 2020

One of the biggest topics these days is the long term impact of COVID. Will it lead to dramatic changes? Or back to usual routine? This is not merely academical. Billions of investment decisions will ride on this.

Some scenarios

COVID is going to impact many many things. Getting the future right, by luck or otherwise, can result in investment decisions that lead to huge profit. Getting it wrong can lead to stranded assets, bankruptcy and worse. Lets give a few scenarios to consider.

  1. Will people’s shopping habits permanently swing away from malls to online retail? This trend was already well underway even without Corona. Imagine the amount of retail real estate that would become unsaleable! Even if the premium ones can survive, what about the marginal ones?

  2. Will e-learning become the norm, perhaps with occasional trips to a physical classroom for, may be, 20-30% of the academic year? In which case sessions could be staggered and you don’t need massive space for everyone at the same time. Labs and other such facilities cannot be remote but one can think of a lot of courses and programs that can easily become entirely remote.

  3. Same goes for office space - If those that can work from home are allowed to continue to do so, indefinitely, what percentage of working population would that comprise? 20%? 40%? Perhaps employers could bargain lower salaries and perks with these staff. There is no need to pay parking fees, to cite but one example of potential cost saving.

  4. Will overseas (and domestic, for larger countries like US or India) travel for conferences, meetings and events become the exception? Once companies discover cheaper ways to get same thing done, it is very hard to go back to old ways. Imagine the impact on Hotels, airlines, taxi companies, F&B etc!

  5. Above all, will people fundamentally change the way they look at life, living and consumption? A lot of economic activity is driven by rampant consumerism. We change phones, laptops, TVs, clothes and many other things way too often just because it is affordable to do so. As CoVID continues its march, a lot of people are looking at life very differently - priorities change. Will it lead to reduced consumption? After all, a good phone can work for 3 years and a well made laptop even longer. I am typing this on a 2013 model HP Elitebook! If the craze for constant renewal is replaced with something else, one can imagine the impact on a wide array of industries and businesses.

The future with COVID

We do not have a crystal ball. But we can observe changes ALREADY taking place and draw appropriate conclusions. As with many other things, some countries and leading the way.

For instance, electronic payments have become much more common, in a span of a few weeks. I could easily pay my carpenter through BHIM app. Anything other than hard cash was unthinkable even last year. Many government agencies (like municipal taxes) that have stoutly resisted e-payments are quietly enabling them. They cannot go back. Face to face interface was convenient as it was a source of bribes. Just filling up a complex form, cutting the queue or even getting the right form to fill out could mean a few rupees for a clerk or peon or one of those hangers-on & fixers. Multiply that by tens of thousands and you can imagine the source of resistance to change. That’s being swept aside by the crisis.

Rules for everything from AGMs to international diplomatic engagements have already changed. Security is a constraint but where there is a problem, you can expect answers sooner than later. The rapid ramp up of platforms like Microsoft Teams, Zoom and Google Meet, each trying to oust the other is a case in point.

What should Indian govt do?

Obviously, push things along. India has a great chance to leapfrog SE Asia in this aspect. Even before its cities are filled with glitzy malls and swanky office towers, if the work (as well as shop, study & do many other things ) from home trend becomes permanent, it can lead to enormous cost savings and competitive advantages without endangering existing ecosystems that are too well entrenched, sometimes all the way in political power structures. Property tycoons and the real estate lobby practically run regimes in many places just because of the outsized role they play in economies. These are essentially rent-seeking businesses, and we use the term “rent” in its broad sense. They need the real economy to grow fat. India has a chance to bypass the entire mess.

Electronic shopping goes two ways - not only it provides enormous choice to consumers, it also opens up a huge market for everyone from rural artisans to small businesses. This thinking is also behind Modi govt’s decision to abolish the APMC restrictions and other related laws. For small time shoppers stuck with one electronic store with may be, two models of TVs, a simple search on Amazon or Flipkart brings them hundreds to choose from!. And for a rural business marketing organic coffee or agri products or handicrafts, it means the entire world is their market. Government should do what it can to make things move faster. Often just staying away and not screwing it up with idiotic regulations thought up by bone headed babus stuck in 50s socialism is all that is needed.

For the IT sector in India, both for large companies like Infosys and smaller providers, even freelancers and gig workers, the market just got a lot bigger. Because objections to cloud computing, PAAS, remote access and remote work in the name of security will increasingly become untenable. CIOs will be told by CFOs and CEOs to get it done and not stonewall anymore. I have personally witnessed customers that were extremely conservative changing stances overnight. They cannot go back.

Government has to think of ways to help. Changes to taxation and related policies that encourage these businesses can lead to enormous spin off benefits to the overall economy.

We will develop this topic further in subsequent articles!

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