What are the major impact of COVID 19 on infrastructure facility of India?
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Impact of COVID-19 on Infrastructure and Financial Sectors and Steps taken by Government
Infrastructure and Financial Sectors
Devendra Kumar Vyas, MD - Srei Equipment Finance Limited
Devendra Kumar Vyas, MD - Srei Equipment Finance Limited
India was already struggling with a slowdown when COVID-19 pandemic struck, and now it faces a period of significant economic disruption as the country has been locked down since 23rd March to decelerate the spread of the virus.
There are deep impacts of the lockdown across all the sectors of the economy, albeit with varying degrees of severity. While there has been a direct and severe impact on the services sector, especially segments such as retail, aviation and entertainment; the manufacturing sector has also suffered due to production shutdowns, labour and supply chain disruptions - especially for companies exposed to international trade, as well as falling consumption.
The Infrastructure sector, which was already buckling under immense stress, has been amongst the worst hit with stoppages in toll collections; distribution companies struggling to pay the dues to the power generation companies; and complete shutdown of air travel hitting airport operators. The dramatic fall in demand across most infrastructure segments has further compounded the sector’s woes.
Impact on Infrastructure Sector
Even though growth in the construction sector slouched between 2011 and 2015 with demand for construction equipment witnessing a complete collapse, the sector managed to grow post-2015 and the signs were good, until the lockdown imposed across the country brought unprecedented challenges, and, in many cases, business continuity plans are being put to test for the first time. It is being believed that the coronavirus outbreak’s impact on the infrastructure and construction segment is expected to be worse than that of the 2008 financial crisis-led economic slowdown. The lockdown has resulted in various infrastructure project sites staring at closure, mainly due to its impact on labour movement and supply chain disruption. Construction halt, revocation of toll collection, labour crunch, and severe working capital pressure – these nightmares for any infrastructure company - have become a reality.
Impact on Non-Banking Financial Sector
Non-banks largely cater to the self-employed borrower segment in the retail space, where the cash flows are expected to be more volatile in the current situation vis-à-vis their salaried counterparts. Other non-banks (non-retail), which mostly have exposure to entities or SMEs with relatively moderate risk profiles, are likely to witness an increase in their credit risk in the current scenario. Further, most of these borrowers have limited funding avenues and typically don’t have banking relationships for their credit requirements.
Answer:
NBM Media Pvt. Ltd.
Search ...
Impact of COVID-19 on Infrastructure and Financial Sectors and Steps taken by Government
Infrastructure and Financial Sectors
Devendra Kumar Vyas, MD - Srei Equipment Finance Limited
Devendra Kumar Vyas, MD - Srei Equipment Finance Limited
India was already struggling with a slowdown when COVID-19 pandemic struck, and now it faces a period of significant economic disruption as the country has been locked down since 23rd March to decelerate the spread of the virus.
There are deep impacts of the lockdown across all the sectors of the economy, albeit with varying degrees of severity. While there has been a direct and severe impact on the services sector, especially segments such as retail, aviation and entertainment; the manufacturing sector has also suffered due to production shutdowns, labour and supply chain disruptions - especially for companies exposed to international trade, as well as falling consumption.
The Infrastructure sector, which was already buckling under immense stress, has been amongst the worst hit with stoppages in toll collections; distribution companies struggling to pay the dues to the power generation companies; and complete shutdown of air travel hitting airport operators. The dramatic fall in demand across most infrastructure segments has further compounded the sector’s woes.
Impact on Infrastructure Sector
Even though growth in the construction sector slouched between 2011 and 2015 with demand for construction equipment witnessing a complete collapse, the sector managed to grow post-2015 and the signs were good, until the lockdown imposed across the country brought unprecedented challenges, and, in many cases, business continuity plans are being put to test for the first time. It is being believed that the coronavirus outbreak’s impact on the infrastructure and construction segment is expected to be worse than that of the 2008 financial crisis-led economic slowdown. The lockdown has resulted in various infrastructure project sites staring at closure, mainly due to its impact on labour movement and supply chain disruption. Construction halt, revocation of toll collection, labour crunch, and severe working capital pressure – these nightmares for any infrastructure company - have become a reality.
The more imminent challenge for the construction players remains working capital management. Operational issues owing to the lockdown have also slowed down outstanding payments to contractors by the principals. In most places, milestones have failed owing to the lockdown, hence, milestone-based payments also cannot be received.
Having said that, India’s long-term growth story remains intact. The government realises that economic growth cannot be achieved without growth in infrastructure. Worldwide, redoubling of investments in infrastructure is a key strategy to counter the impacts of a downturn. The government has begun the exercise of creating a national infrastructure pipeline with a vision to invest ₹100 lakh crores in infrastructure over the next five years. Already, highway projects worth approximately ₹15 lakh crores have been identified. Once these investments materialize, we will soon see positive impacts in sectors such as cement, steel and automobiles, besides, of course, the infrastructure and construction equipment sectors.
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