Page 44 - Banking Finance August 2020

ARTICLE

could not harvest their crops, 37% were forced to go for
distress selling and 15% failed to sell their produce. The silver
lining even in these times has been the faster recovery of
the agriculture sector when compared to others. Further,
CRISIL projects agricultural growth at 2.5% for 2020-21.

MSME contributes about 30-35% to our GDP, while
engaging more than 6 lakh micro, small and medium units,
out of which 49% are located in rural and 51% in urban
areas. All India Manufacturers Organization survey (AIMO
survey June 2020) shows since March, 2020, around 35% of
MSMEs and 43% of self-employed have been under closure
resulting into 12 crore unemployed masses. The worst-hit
have been consumer goods, readymade garments and
logistic companies. The Service sector enterprises are still
in a better position, treading atleast, slowly though. Similarly, If we look at the vulnerabilities of health care system, this
the Online/Internet businesses and start-ups share approx.. pandemic has made impossible for the pregnant women to
950 billion US$ in our GDP. The nationwide lockdown has visit obstetrician for prenatal checkups and instead of this,
tremendously affected the operations of the E-commerce are opting for telemedicine. Many hospitals are mainly
industry especially at a time when there is a huge demand focusing only on COVID-19 patients and due to this, they are
for home delivery of goods. ignoring other patients suffering from some other major
problems like cancer. If this continues, the death rate from
Looking at the Defense and Security of our country, it has corona will be lower than the death rate from other
been observed that COVID-19 impacted the supply chains diseases.
and production/manufacturing facilities of defense
companies. As they have to depend on different components This deadly pandemic has taught a lesson that temples,
on different sources located in affected countries, this has statues and museums are not a necessary requirement but
led to a drastic decrease in demand for defense equipment. the hospital with world-class infrastructure are. Even there
can be seen an adverse impact on the profitability of
The current scenario is not even good for business medical device manufacturers who import consumables,
development as we know that many high-value disposables and capital equipment from other countries.
procurement programmes were finalised during defense
shows which are now cancelled. Military exercises, which Coming further to Infrastructure, construction and real
expose foreign equipment and their capabilities to the estate, as a result of halt in construction activities and
prospective buyer also affected business development as reduction in demand, over 40% reduction in new unit sales
many countries like the USA, UK have cancelled travel plans, has been found in major 7 metros of India.
deployments and exercise for troops.
The last credit cycle for Indian banking sector had seen
Even the assembled equipment which are ready for dispatch sharp surge in bad loans. Indian banks are at the end of a
are also held up due to the lockdown of airspace. Due to prolonged NPAs clean-up cycle. The hidden stock of bad loans
non-despatchment on time their sale values are substantially buried deep in the balance sheets, accumulated over the
reducing which in turn is about to affect the balance sheet years of easy money era, prompted the RBI to initiate an
of the manufacturing companies. The pandemic has taught Asset Quality Review (AQR) in 2015. By now, that process is
a lesson to defense industry that they need to explore the almost over with banks having disclosed most of the
different aspects of risk planning and shift themselves toward problematic large corporate accounts. Many large cases of
technological platforms or start using an unmanned system. corporate loan defaults have been pushed to the Insolvency

44 | 2020 | AUGUST | BANKING FINANCE