Karnataka: Coronavirus clampdown hits over 1 crore jobs

Damned if you do. Damned if you don’t. This has been the conundrum the state government officials are facing as they have the daunting challenge of curbing the novel coronavirus epidemic in the state.

The government’s orders on Friday to close down places of commerce, industry and social assembly to prevent coronavirus cases from snowballing has seen the city devolve into a veritable ghost town in just the first 24 hours of the clampdown. At the same time, the city’s purchasing and economic power has also dwindled.

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As financial experts across the gamut scrambled to decipher the scale of the losses, B T Manohar, a tax expert for Federation of Karnataka Chambers of Commerce and Industry warned that the loss of GST and sales tax revenue alone for the state exchequer would amount to a staggering Rs 2,000 crore, if the clampdown lasted for even a single week.

Another expert warned that this decline was just the edge of the precipice, beyond which the falls would be steep and dangerous.

Nowhere is this more apparent in the metropolis than in entertainment and recreation. According to data from ANAROCK Retail, Bengaluru has 24 operational malls with a cumulative area of 10.54 million sq feet. Between them, they have 21 cineplexes. In Karnataka, there are over 40 malls and 38 multiplexes. In addition, there are around 600 single-screen theatres in the state.

The closures have affected Bengaluru’s thriving mall culture, although the implications of the losses will not be known for a week. According to data from a retail firm, Bengaluru has the second-highest number of metropolitan malls in the country, after New Delhi with 33 (although Mumbai also has 24). It has the second largest number of malls with a cinema multiplex in the country (21), after Mumbai, which has 24.

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Even the short-term closure of these malls and multiplexes will have significant financial implications as these establishments attract massive footfalls, said Anuj Kejriwal, Managing Director and Chief Executive officer of
ANAROCK Retail.

He added, however, that while these closures could not be justified financially, they were likely to be imperative from a healthcare point of view.

Not everyone agrees. In the state’s thriving Information Technology (IT) sector, the alarm has erupted not only over the fact that onset of Covid-19 in Bengaluru was largely enabled by techies returning from overseas, but that the loss of business in the resulting clampdown could create a long-term dent in the industry’s economic fortunes.

An industry insider who did not want to be named said that IT companies are heavily dependent on manpower and are not able to operate due to restriction in movement of people arising from lockdown and quarantine issues.

Karnataka’s IT exports amounted to Rs 1,69,699 crore in the 2019 fiscal year. The implications of a loss of business are significant. According to sources, the state is home to over 5,500 IT or IT-enabled services companies. In addition, 750 multinationals with operations in the state contribute over $58 billion worth of exports. The IT sector employs over 12 lakh professionals and creates 31 lakh indirect jobs.

“The industry contributes to over 25% of the State's GDP and it accounts for 40% of the country's total software exports of $155 billion. All that is imperilled by the clampdown, especially if it becomes a long-term thing,” said an insider.

Meantime, another state powerhouse, the manufacturing sector, is also looking at stark losses.

While the government’s edicts asking people to work from home may sound reasonable, it is totally impractical among the blue-collar workforce, explained a Bangalore Chamber Of Industry And Commerce official. “Shop floor activity cannot be carried out from their homes,” the official said.

Already, small-scale industries in Peenya, one of the biggest industrial clusters in the country, is estimated to have suffered a 30% production loss in the last 45 days, owing to disruptions of the supply chain from China, due to coronavirus.

Supply chain disrupted

According to sources, there are about 9,500 companies in Peenya, out of which, an estimated 20% are dependent on China for the supply of components such as electricals, electronics, auto components and rubber parts. The supply of these goods has been disrupted since the beginning of February.

Chandrahas Panigrahi, CMO and Consumer Business Head, Acer India, complained that the shortage of products from parts from China had thrown the electronics manufacturing community into unparalleled challenges.

In parallel, the supply chain and logistics industry is said to be stumbling. For example, a large automobile company situated in Bengaluru has strictly suspended the movement of their key executives – both incoming and outgoing. This company is largely dependent on support from its headquarters in Japan. The company has also seen disruption in the supply of key components coming from Thailand, Indonesia and Japan.

“The company, on an average, is visited by 30 to 40 key executives every day from Japan. The company is now looking for alternatives for key components other than these countries to keep its production going,” an executive said.

With luxury hotel chains attracting about 60-65% foreign travellers in their total guest composition, Jaideep Dang, Managing Director of the Hotels & Hospitality Group, JLL said luxury hotel rates are expected to decline in both quarter one and two as a result.

“Occupancies will be hit for sure. A full rebound may take time but we could see some recovery signs in the third quarter depending on the wider situation,” he said.

Agarwal pointed out that across the board, the economic activity has slowed down. “The price of commodities have crashed, the oil industry is affected, as is the agriculture sector, which in turn, impacts rural demand,” Agarwal said.

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Experts held up the state’s poultry sector as a paradigm of the losses being endured by agriculture. Before the onset of Covid-19, poultry was growing at a rate of six to eight per cent per year.

The sector employs 7.5 lakh persons directly in Karnataka and 60 lakh indirectly. Manjesh Kumar Jadhav of Karnataka Poultry Farmers & Breeders Association said that live bird sales have dropped by about 70% on a daily basis with the prices crashing to Rs 10 per kg from Rs 80 per kg.

Also bewailing reduced earnings are members of the passenger transport industry. In a letter to the chief minister, Karnataka State Travel Operators Association stated that more than 80% of the private buses and taxi operations have come to a halt due to fear over the spread of novel coronavirus.

The Indian Vehicle Drivers Union said nearly 50% of the 1.83 lakh cars providing taxi services, including those working with aggregators like Ola and Uber, have witnessed a slump in the business.

“The average earnings of the drivers stood at Rs 600 and the fear of Covid-19 has made it difficult to save a fraction of it,” said G Sadandaswamy of the union.

“The airport bookings have reduced drastically,” added L K Radhakrishna Holla, president of the association.

Although the clampdown, which falls in line with World Health Organization guidelines to use quarantining or “social distancing” to reduce the spread of the virus had drawn praise from several quarters, critics have lambasted it as hasty and ill-advised.

Far from trying to address the growing sense of panic over coronavirus among the masses, the clampdown appears to show that the government itself panicked in its haste to tackle the pandemic, critics said.