When I wondered what I could predict about the Indian economy in 2021 that IITians don’t know or have not at least, already read about, I thought it might be worthwhile to reconnect with Cyrus the Virus, named after the famous Persian Emperor, who had helped me call out the pandemic, in my last year’s annual note, Tipping Point. He had told me in advance about the dire straits that we would find ourselves in 2020. It is another matter that governments in most countries delayed their response, sometimes, to as late as in end March. We kept in touch regularly ever since. Here is what he told me, even as I was still nursing my first peg, on the new-year’s eve:
“You humans have made commendable strides in trying to understand me since we first spoke last year, but there is very much more that you don’t know. It will take you more than a lifetime to understand most of the virus families, but in less than half a decade, you could understand enough to deal Coronaviruses, the family to which I belong. Our fight is not over. We are mutating so rapidly, thus what might have worked eight months ago, will not work as effective anymore.”
It left me nonplussed when Cyrus explained that species evolve over several generations, but what takes humankind 2000 years is a mere hour for some types of viruses. “Unless you can wipe out an entire population of my variant cousins very quickly, we will produce several more virus serotypes and you will need vaccine modifications. I know that you cannot wipe us out quickly because for every ten humans who get vaccinated early, there are probably five who will either completely avoid or delay vaccination. Prize idiots like Trump help us. Add to that your inability to manufacture enough affordable vaccines quickly enough.”
This made me look closer at him, only to realise that he looked a bit different and that I was probably talking to a different Cyrus the Virus each time I spoke to him over the year. I asked him about the South African variant. The latest Cyrus avatar told me, “My South African cousins (B.1.351 or 501Y.V2) differ significantly from the UK cousins (B.1.1.7) in ways that may reduce your vaccines’ effectiveness.
“Even if the South African variant spreads fast to become more dominant, the mRNA (Pfizer-BioNTech and Moderna) and adenovirus-vectored (Oxford-AstraZeneca) vaccines can be modified to be more close-fitting and effective against this variant in a few months.”
Oh my God, I realised, he is saying something not just about 2021 but that year and beyond! There could be future outbreaks and more valiant efforts to modify the vaccine. If the virus is going to be around and will spill over to CY2022, what will life and work be? Not the same as it was before the pandemic, although India’s GDP could get back close to the 2019-20 level at the end of 21-22. There is an expectation of 8.2 to 9.5% GDP growth in the coming financial year. I, therefore, did more reading and more thinking about what I had already expected in 2021. It looks as if:
There will be a shortage of vaccine in Q1 CY 2021 despite the best-laid plans, even of the USA. There may be more lockdowns in some parts of the world and ugly elbowing amongst nations to corner a share of the vaccines, leading to a shortage of vaccines being acutely felt in many countries throughout the year. India will face a vaccine shortage in H1 CY 2021.
Social distancing and masks will not go away any time in 2021. Stock up stylish ones, guys, they are available. Those who have already contracted Covid-19 and those who get vaccinated can get re-infected by a new variant, but they may face fewer problems.
International travel will probably require certified proof of vaccination in addition to a Visa.
WFM (Work from Home) could at best become WFH&O (partly Home, partly office) but offices buzzing with activity like before will become a distant memory. That will be safe and good for employees and employers, very good for traffic management and the environment, but bad for all the vendors who served offices in multifarious ways.
New housing complexes in cities may have shared work areas within the complex for those who miss working away in an office.
You and your doctors will continue to prefer teleconsultation, so much so that it will become the preferred mode for many in the future too. In 2021, more physicians will get onto integrated platforms that offer not just video connectivity with patients but also a patient record system, into which diagnostic reports will be input automatically; even in rural areas, pathology machines using IoT will gain traction.
Drug detailing by medical reps will also systematically shift online. Pharma companies too will find this the preferred mode. Software will track calls, evaluate, and improve the effectiveness of detailing, analyse doctor reactions, classify doctors by likelihood to prescribe, correlate with purchases from shops (and increasingly, from online pharmacies), etc. using speech and video analytics, and AI. Eventually, Bots, which will do the job more efficiently and reliably, will replace medical reps. Thus nearly 50% of the marketing costs of Indian pharma companies can be saved.
Significant investment will flow into developing biopharmaceutical, biomedical solutions, bio-engineered products, and devices that were mostly in the labs until now in India. The prospects of an order-of-magnitude impact on patient outcomes and consequently of profits will be the driver. Moderna and Pfizer-BioNTech vaccine which uses the not-so-new mRNA technique will give a boost to translational research to cure many other non-communicable diseases, including cancer. There will be venture funding opportunities.
Consumer spending will rebound, not just in India. Consumers around the world have $1.5 trillion in savings created during 2020. This can boost the GDP very significantly in countries like the US where it accounts for 70% of the nominal GDP, UK (64.8%), India (59.7%), EU (53.9%), etc. While most of those countries have stepped up their spending to boost the economy, the Govt of India did not in 2020 (good social schemes were funded by diverting from other account heads). It remains to be seen on Feb 1 whether India will spend more in FY 21-22 to simulate the economy. Increased consumer spending in 2021 will continue to have a significant component of ecommerce, even after fear of the virus subsides. It is now imprinted on the lifestyle of urban India right down to Tier 4 towns.
Many corporates will struggle to offer truly Omnichannel distribution, e.g., to offer Direct to Consumer sales mode, although some consumers would like to buy online. It is more a business model issue and struggle to create new processes to engage with consumers than a technology issue for these businesses which have always used traditional channels. A few like Aprila (scooters) have already shown the way. There will be more examples in 2021.
Digitisation which would have happened over the next decade has already happened in 2020, not just in India. But it is still a partial transformation. There is much more to come in 2021 and beyond. The Banking system is today, like the gold standard in digital transformation. Many other businesses will transform in five years to the extent as India’s banking system did over two decades since it is now cost effective and imperative. This and selective adoption of Industry 4.0 is required (and may happen) in manufacturing, else, Indian manufacturing would lose its cost competitiveness to the West which designed it to offset labour cost disadvantage.
All this (including businesses reacting to the COVID crisis) will lead to unemployment, especially at the middle management levels. In the US and EU, such unemployment has resulted in a sudden jump, from mid-2020 onwards, in new small business ventures being set up by people out of jobs seeking a permanent solution. This is possible in India, too.
Leisure travel will get a boost in once vaccination takes off. It has already been on the mend in H2 of CY 2020 but still small compared with the pre-Covid times. Business travel will lag leisure travel. International travel will lag domestic and regional travel. Consequently, long-distance routes for airlines will see fewer takers than before as long as the viral threat remains, but domestic and regional air routes will be in demand. Business travel will pick up in 2022 despite virtual meetings becoming an established norm. Travel operators will struggle with international packages since they will be subject to periodic travel restrictions in many countries.
The Government of India has realised the enormous cost of the disruption caused by the pandemic. It would therefore stand to logic that the forthcoming Budget will allocate a sizeable amount of funds to:
- vaccine procurement and distribution because half the country may not afford vaccination
- vaccine development grants
- healthcare to contain and mitigate COVID cases in FY21-22
- prevent human encroachment into animal habitats and climate change.
The last mentioned is important because scientific evidence points to a high probability that transmission of viruses from animal to humans is happening and will increase because animal habitats are being greedily encroached. Also, animals leaving their traditional habitats because of climate change. The parting message from Cyrus the Virus was that if the whole of humankind takes care of these two aspects in all seriousness, and let the wild animals be where they belong and humans remain where we ought to be, there will be no new viruses crossing over to humans. It would save everybody a lot of bother.
Banks around the world are facing big write-downs because borrowers have been hit. In India, the impact on Banks and NBFCs will be clear before June 2021, when NPAs spill out of their vaults. Right now, the stock market, buoyed by liquidity, seems oblivious to this threat.
The automobile industry in India will start picking up; expect waiting lines for new releases, the demand for used cars will exceed that for new cars. But it will take a couple of years for the industry to reach pre-COVID 19 levels.
The textile industry and the Infrastructure sector, which are the other two mother sectors for job creation in India, that need immediate help to revive. They may get some help in the Budget though they were overlooked in Feb 2020 when India needed them to tick in order to revive the economy.
Despite the pandemic, many corporates will show higher profits on lower revenues when the FY20-21 results are declared in 2021. Cost restructuring is here to stay, though salary-cuts will be restored.
Finally, though there is a lot more to write about various industry sectors, let me point out just two things:
- A concern that the pandemic has shifted wealth from the poor to the rich, from small businesses to big businesses and from non-digitized businesses to digitally-enabled businesses, stressing the differences between the Haves and the Have-Nots. The Government on its part may even reintroduce inheritance tax on the rich, but that will be useless unless it goes to fund welfare schemes to empower the Have-Nots.
- The post Pandemic world will present new opportunities because people and organisations (schools, universities, hospitals, manufacturers, advisory firms, distribution channels, etc.) have been forced to change. Innovative people will rule the roost.
If you are good, your clock starts now.