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State of the economy: Cloudy with a chance of Covid-induced haemorrhaging

Moneycontrol’s reporters fanned out across three cities in different parts of the country to get a sense of the state of the economy. We looked at different layers of the economy, talking to wholesalers, retailers and MSMEs. And we found that things are far from hunky dory. While there are pockets of recovery, those in the business of business are still struggling

March 25, 2021 / 08:55 AM IST
Beawar, Rajasthan, India - March 21, 2020: A shopkeeper wear facemask as a precaution from coronavirus pandemic 'COVID-19' in Beawar. Photo/Sumit Saraswat

Beawar, Rajasthan, India - March 21, 2020: A shopkeeper wear facemask as a precaution from coronavirus pandemic 'COVID-19' in Beawar. Photo/Sumit Saraswat

The wholesale markets of Chandni Chowk in Old Delhi have witnessed history. Built in the 17th century by Mughal Emperor Shah Jahan, the narrow alleyways and shops have seen empires rise and fall, and generations have plied their trade here through seismic events such as Independence, partition, famines, social unrest and economic upswings and downturns.

One such downturn, the economic slowdown that was exacerbated into a crash early in 2020 by the COVID-induced nationwide lockdown, continues to roil Chandni Chowk.

The unprecedented crisis wiped out crores in potential earnings and destroyed livelihoods. And while the Indian economy may be bouncing back from those depths, things are still not rosy for the businesses of Chandni Chowk.

According to data available with the Chandni Chowk Sarv Vyapar Mandal, some 30 percent of pre-pandemic jobs have been lost, and many of these may never come back. “There is some recovery. In the saree markets, people were back on a buying spree after two subdued wedding seasons. However, with Covid cases rising again, things are again becoming difficult for us,” said Sanjay Bhargava, president of the Chandni Chowk Sarv Vyapar Mandal.

Chandni Chowk is also home to Asia’s largest spice market, in Khari Baoli near Fatehpuri Mosque. Upon entering, you are hit by a sensory overload thanks to the aroma and colour of spices and dry fruits.


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“Due to Covid, our business suffered drastically. I had to cut down the number of workers from ten to five now. Adding to the woes, the price of some spices has decreased in recent times,” said Kulwant Singh, owner of a wholesale spice trading store. Storeowners across the board say that footfalls are nowhere close to pre-pandemic levels.

From a gross domestic product contraction of 24.4 per cent in April-June 2020, the Indian economy recovered to post a slightly positive growth print of 0.4 per cent in the October-December quarter.

Analysts across the board agree that the recovery was due to strong corporate earnings, but only in certain sectors. In fact, many expect the January-March 2021 quarter to show another economic contraction.

Micro, small and medium enterprises (MSME) and the informal sector have been the worst hit by the slowdown as they could not scale up activity or downsize manpower as effectively as the large corporates.

Old delhi, Delhi / India - October 25, 2020: Man selling peacock or peafowl feathers in street. Editorial credit: Vasu Ahluwalia / Old delhi, Delhi / India - October 25, 2020: Man selling peacock or peafowl feathers in street. Editorial credit: Vasu Ahluwalia /

Hiring, too, has been impacted. Praneesh Satpathy, CEO at PS Next Hiring Solutions, which specialises in SME hiring, told Moneycontrol that there has been a 25 percent dip in hiring at small and medium companies due to a slump in business.

“SMEs don't have the financial capital to hire talent. Replacement hires are also being done on a selective basis,” he added.

A year after the nationwide lockdown, Moneycontrol’s team of reporters visited markets and industrial clusters in Delhi, Bangalore and Mumbai, in order to better grasp the nature of the economic recovery, and whether it is entirely bypassing small brick-and-mortar businesses.

 Electronic Blues

Bengaluru’s SP Road is home to more than a 1,000 electronic shops that sell laptops, computers, mobiles and accessories and employ more than 10,000 people. Traders say the market is yet to see the pre-pandemic buzz and collectively, business is down by more than half of what it used to be.

Lakshman Rajpurohit, who runs a mobile accessory shop, says his lifestyle has changed over the last year. He had to move to a much smaller house and slash expenses to put his 11-year-old son through school.

“My business went from a turnover of Rs 1 crore per month before the onset of the pandemic to Rs 40-50 lakh. Unlike what popular opinion says, business has hardly recovered,” he says.

SP Road was one of the first business clusters to be cordoned off in Bengaluru when the pandemic hit in March. Even as the country re-opened, many dealers had shut shops and their counterparties were unable to get back their dues. Rajpurohit says he has had to write off Rs 6 lakh as those who owed him money had shut their businesses and are untraceable. “I have filed an FIR but it has not been of much help,” he says

Most of the traders here had laid off half their workforce to cut costs and are still running at reduced capacity compared to last year. They have no plans to hire more.

Electronic hubs such as SP Road and Mumbai’s Lamington Road have had a peculiar problem. The demand for mobiles and other electronic goods actually spiked as people shifted to work from home and classes moved online. “Suddenly everyone wanted new laptops and desktops,” explains Dinesh Charan, who runs JD Computers on SP Road. But they could only cater to so much demand. “We had in supply only five items of a particular make when there was a demand for 20. What could we do,” says Charan.

That gap was bridged and demand addressed by e-commerce firms, which have seen business boom amid the pandemic, especially for phone and computer purchases, as people looked to avoid crowds and limit human interaction. 

2 November 2018. Bangalore, India. A busy electronic market. SP Road, Bangalore Picture credit: Pradeep Kumar KV / 2 November 2018. Bangalore, India. A busy electronic market. SP Road, Bangalore
Picture credit: Pradeep Kumar KV /

Older businesses hit

While there was a massive shift towards e-commerce, only a few brick-and-mortar retailers have been able to sell their inventory through such platforms.

Saleem Siddiqui, who has two stores on Lamington Road in Mumbai and one in Kolkata’s Bagree Market, under the name ‘Siddiqui & Co’, said that while business was slowly being taken away from e-commerce companies in the past three years, the shift was drastic over the past year.

“People were no longer going to office. Since remote working meant longer hours, their phones/laptops were in need of constant upgrades. But considering the offers online and the lockdown, customers bought all these products from websites,” he said. Siddiqui, who earns close to Rs 3 crore in revenue a year from his business, saw that turnover drop 45 percent over the past year.

The lighting business in Mumbai also took a hit. Traders and small business owners at the wholesale-led Crawford Market told Moneycontrol that with weddings shifting to homes and ‘Zoom’, business was weak and their prospects were bleak.

“Usually, from November onwards, we see a slow pickup in business from Diwali sales and weddings. But 2020 was a very bad year, probably the worst in my 50-year-career as a lighting businessman,” said Jamal Khopoliwala of JK Luminaires, which has been selling lights to retail and corporate customers since 1941.

Sixty-five-year-old Khopoliwala, a second-generation businessman, refused to share exact revenue numbers but said weddings constitute 65 percent of his annual business. In 2020, he did less than Rs 5 lakh in wedding-related lighting business.


MUMBAI INDIA - NOVEMBER 11, 2017: Unidentified people visit Crawford market. Crawford market is one of the biggest market in South Mumbai. Picture credit: TK Kurikawa / Unidentified people visit Crawford market. Crawford market is one of the biggest market in South Mumbai. Picture credit: TK Kurikawa /

The China Problem

Apart from the pandemic, 2020 also saw ties worsening between India and China, and this has impacted dealers and store-owners in electronic goods markets more than any other sector.

Charan of JD computers explained that more than 90 percent of his products were sourced from China. Sourcing from other countries at scale is not feasible. Meanwhile, China has also increased the price of raw materials due to the spurt in global demand in the wake of the lockdowns in many countries. “Logistics costs have doubled and delayed clearance in customs due to Covid-19 has also been an issue,” he said.

Before the pandemic and the India-China border stand-off, these dealers could order directly from China and get consignments delivered to the region of their choice. But now, there is no direct shipping possible from China. “From China, it goes to Hong Kong, Dubai and then to India,” said a store owner. This has jacked up logistics costs, too.

Moneycontrol had reported earlier how white goods firms were badly hit due to the sudden lockdown, shortage of raw materials from China and rise in prices. Dealers were also a victim of this situation.

 Government intervention not enough

Small business owners say there is much more that the government can do to improve their lot. They point out that some of the customs duty hikes have, in fact, been detrimental to their cause. Budget 2021 increased the customs duty on certain electronic goods such as camera modules to 2.5 percent from zero. Some input parts needed for mobile chargers were also increased from zero to 10 percent.

“Instead of loans, the government could have temporarily abolished GST for 3-6 months so that customers and dealers benefit. Now, there is a second wave and fears of another total lockdown loom large,” says a trader.

“The lockdown could have been planned better. Or else small traders like us should have been given some cash incentives. The government did announce a package but that was mostly loans. If I take up another loan, how will I repay,” says Siddiqui.

Rahul C, who runs a small computer accessory shop on SV Road, explained that only companies that have good relationships with bank managers have been able to benefit. “How many would actually know about the schemes the government has announced considering that these are small traders? There was no awareness on the ground,” he added.

What the traders need, SP Road’s Charan explained, is to make availing loans easier and based on turnover at reasonable interest for MSMEs. In the absence of such measures, the sector would continue to be affected.

THANE, INDIA APRIL 14th 2020 A man walking on the street during the pandemic lockdown with a mask. Editorial credit: Jameson Sahariah / THANE, INDIA APRIL 14th 2020 A man walking on the street during the pandemic lockdown with a mask. Editorial credit: Jameson Sahariah /

Bigger MSMEs also affected

Reading this piece so far, one might think that it is the smaller store owners who see bleak signs of recovery. Far from it.

Okhla in south-east Delhi is one of the city’s biggest industrial clusters, with many distributers of FMCG giants located there. They say that while sales in terms of volumes have recovered, due to lower sales of premium products and discounts, revenues are still lower than a year ago.

“Volume-wise we are doing around 5 per cent higher than last year, but in cash terms we are below last year’s numbers. Earlier we used to supply to around 20 companies directly, but now we only supply to five companies, because companies are shutting down offices,” said a major HUL wholesaler.

“We had shut down two of our five warehouses last year, and while we will look to reopen one of them by next month, we are still facing some cash flow bottlenecks, as smaller retailers are taking longer to pay us. Since we haven’t reopened our warehouses yet, we have not rehired the employees we had let go. But as things are slowly improving we will look at hiring more people,” said Anil Sakhuja, ITC’s biggest wholesale dealer in Delhi.

The area’s service industry has also seen a downturn since the outbreak of Covid, most Business Process Outsourcing companies that had offices Okhla have let go of their offices as their employees were working from home.

 ‘Touch’ Services the worst hit

Another point most analysts agree on is that ‘touch services’ such as hospitality, restaurants and tourism will take the longest time to recover. The National Statistical Office itself projects that ‘trade, hotels, transport’, communication and broadcasting’ will contract by 18 per cent in 2020-21, more than any other sector that contributes to India’s GVA.

Situated in the heart of the national capital, Connaught Place shopping district, popularly known as CP, boasts of some of the most popular cafes, restaurants and bars in the city. While the lanes and blocks around CP are brimming with activity on a Sunday afternoon, the mood inside the restaurants tells a different story.

According to restaurant employees, footfalls have fallen drastically and business is less than half of what it used to be as people are still reluctant to step out fearing infection.

“We are making only 40 percent of the pre pandemic business,” said MS Rana, Corporate General Manager, Imperial Spice. Only three tables were occupied when Moneycontrol visited.

Rana says that the restaurant currently employs 24 people compared with 65 pre-pandemic. He added that most of the staff was reluctant to re-join work after a 35 percent salary cut and many had started fast-food stalls back in their hometowns.

Expressing dissatisfaction with the government, Rana said: “The government has paid absolutely no attention to the needs and grievances of our industry. Despite repeated demands like cuts in GST and other taxes put forward by the industry bodies, the government has ignored us like we are immune to the pandemic,” he said, adding that he had to sell his car because he could not afford the monthly instalments.

New Delhi, India - April 14, 2020 - Photographs of Connaught Place in New Delhi, India. Editorial credit: Ayush Chopra Delhi / Near empty Connaught Place in New Delhi during COVID-19 lockdown. Editorial credit: Ayush Chopra Delhi /

A few blocks away from Imperial Spice is another restaurant, Unplugged Courtyard, one of the few places in the area offering an open-air ambience. But, like Imperial, only three tables were occupied in the outer area. Explaining the empty seats, Punit (name changed), a staff member, said: “Summer and monsoon have always been off seasons for us since we are an open-air restaurant. But now that daily cases are rising so rapidly again, we are worried that whatever customers were coming during this time will also not return.”

Restaurants have adopted aggressive cost cutting strategies to stay afloat. Some of those include cutting down on staff, condensing the menu, saving on electricity and ordering only weekly stock and not monthly as earlier.

CP also houses many established travel and tour operators. Speaking to Moneycontrol, Gaurav Chawla, Managing Director, Swan Tours said: “Travel and tourism is a very sensitive industry. It was the first one to get affected and will be the last to recover. I think it will take at least 18 months to recover to the pre-corona level even if active cases slow down.”

“At this point we are receiving only 10-15 percent of our pre-Covid-level bookings as people are reluctant to step out for family holidays. January was a relatively good month for us but now that the cases are rising so rapidly, things will only go downhill. People don’t want to go on vacations with fear and tension of catching the virus and instead want to relax while on holiday with a free mind. That has become a challenge because of the pandemic”

Chawla noted that the government has been apathetic to the plight of the industry. He says that the abolition of GST and reduction in taxes would have helped ease some pain for the industry.

Shanti Kohli, Managing Director of Amber Tours Pvt. Ltd from Barakhamba Road, has similar complaints. Commenting on the outlook for the sector, Kohli said: “I must say it is domestic tourism that is really keeping our industry afloat. We are in dire need of inbound travel not just as a company but as a country as it helps us earn foreign exchange. Domestic tourism cannot help us sustain indefinitely. Even the thought of another year like 2020 seems extremely scary; another 6-8 months will be manageable but one more year without borders reopening will definitely not be okay.”

(Reporting by Swathimoorthy KP in Benguluru; M Saraswathy in Mumbai; Shine Jacob, Yaruqhullah Khan and Shreeja Singh in New Delhi. Written by Arup Roychoudhury)
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