These words shall be considered as people’s words, and
not as an Economist words..... effect on Industry and house hold income, taking into
account some very broad numbers, considering 3 months of India lockdown; (1.5
month complete lockdown, thereafter partial lockdown) and 1 or 2 months more
before businesses and supply chains get back to its normal. God knows, what new
normal operations will be after Corona, but let's say that it get back to 90% of the
earlier capacity; not factoring any second wave of a pandemic in my analysis.
If that happens, well the numbers below will be further disastrous.
Estimates to keep Indian GDP in positive % growth; this brings me to a subject of Tax collections :
Estimates to keep Indian GDP in positive % growth; this brings me to a subject of Tax collections :
--Direct Tax collections could he down by 25% (Lower
corporate profits and Individual earnings)
--Indirect Tax collections could be down by 15% (complete supply chain disruption)
--State Tax collections eg. stamp duty, liquor levies, mining royalties etc. could be down by 15%
How the government will balance the book is again a big subject for another day, wherein today, I will try to estimate how people’s earnings and household incomes would be affected, will break it down in these categories :-
1. Farmers and farm laborers....could see 10 to 15% negative income and 5 to 10% job losses
2. Blue collar workers....5 to 15% job losses and zero incentives and wage increase. So 10% overall lower income for the year
3. White collar workers….. 5 to 10% job losses and reduction in some salaries and perks and almost no bonuses. So overall 10 to 15% lower earnings for the year.
4. Owners of small and medium businesses….Worst hit sector, most people I am speaking to are wondering If they will survive. Most estimated losses for the year, Some may do ok, but overall a 30 to 40% decline in income could be estimated.
5. Large corporation owners and shareholders….. If industry de-growth is at 15% minimum that may result in 20 to 40% lower profits in many segments, and losses in several other segments.
6. Individual service providers (Electricians, carpenters, 100s of other such providers) could also see a 20% lower income
7. Landlords lower earnings due to Residential rentals could drop by 10 to 20% and vacancy could rise by 10 to 15% due to lower number of people migrating within or outside their countries or home cities.
8. Commercial real estate rentals would decrease by 10% on average and vacancy rates could be higher by 10%. Retail rentals would be worst hit by about 15 to 25% and vacancy rates could be higher by 10 to 15%. Overall rental incomes of all segments point to 15 to 20% lower rental income for lease generating assets.
9. Savers would see lower returns on Fixed income products by about 15% with zero additional savings as a whole in the economy. Equity at best could be a flat year with no overall growth or at worst we could see a decline of 15% to 20% in the portfolios. Debt mutual funds would see increased defaults and hence at best give very poor returns.
10. Behavioral change going to happen in many sectors and People are understanding value of savings. People will save more and understand where those savings are getting deployed – mutual funds, insurance premiums, banks, bonds.
India is biggest hub of consumers and producers; with unique survival and balancing of economy, blessed with abundant natural resources, entrepreneurial skills, education level, talent, risk appetite, average working age of about 42 years and may more positive factors.
--Indirect Tax collections could be down by 15% (complete supply chain disruption)
--State Tax collections eg. stamp duty, liquor levies, mining royalties etc. could be down by 15%
How the government will balance the book is again a big subject for another day, wherein today, I will try to estimate how people’s earnings and household incomes would be affected, will break it down in these categories :-
1. Farmers and farm laborers....could see 10 to 15% negative income and 5 to 10% job losses
2. Blue collar workers....5 to 15% job losses and zero incentives and wage increase. So 10% overall lower income for the year
3. White collar workers….. 5 to 10% job losses and reduction in some salaries and perks and almost no bonuses. So overall 10 to 15% lower earnings for the year.
4. Owners of small and medium businesses….Worst hit sector, most people I am speaking to are wondering If they will survive. Most estimated losses for the year, Some may do ok, but overall a 30 to 40% decline in income could be estimated.
5. Large corporation owners and shareholders….. If industry de-growth is at 15% minimum that may result in 20 to 40% lower profits in many segments, and losses in several other segments.
6. Individual service providers (Electricians, carpenters, 100s of other such providers) could also see a 20% lower income
7. Landlords lower earnings due to Residential rentals could drop by 10 to 20% and vacancy could rise by 10 to 15% due to lower number of people migrating within or outside their countries or home cities.
8. Commercial real estate rentals would decrease by 10% on average and vacancy rates could be higher by 10%. Retail rentals would be worst hit by about 15 to 25% and vacancy rates could be higher by 10 to 15%. Overall rental incomes of all segments point to 15 to 20% lower rental income for lease generating assets.
9. Savers would see lower returns on Fixed income products by about 15% with zero additional savings as a whole in the economy. Equity at best could be a flat year with no overall growth or at worst we could see a decline of 15% to 20% in the portfolios. Debt mutual funds would see increased defaults and hence at best give very poor returns.
10. Behavioral change going to happen in many sectors and People are understanding value of savings. People will save more and understand where those savings are getting deployed – mutual funds, insurance premiums, banks, bonds.
India is biggest hub of consumers and producers; with unique survival and balancing of economy, blessed with abundant natural resources, entrepreneurial skills, education level, talent, risk appetite, average working age of about 42 years and may more positive factors.
India Emerging economy supported with so many strong
fundamentals, still need increased flow of money in spending, to keep growth
showing new higher numbers. COVID is pandemic, but after covid may have opportunities
to grow faster. Entrepreneurs and people sitting at home in Lockdown, shall use
this time to plan their positive contribution towards strong Indian economy, better utilization
of available resources and develop best appetite for development risk, in pace
with changing technology and consumer behavior. Indian businesses are known to
change from worst to best……….. Lets prove it again in year 2020, with high
hopes
by :
CA Yogesh Birla
Director
Birla WP Management
visit us at : www.YogeshBirlaCA.blogspot.com
Birla WP Management
visit us at : www.YogeshBirlaCA.blogspot.com
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ReplyDeleteLaege sr citizen grp. who mainly depends on fixed investment.This income will definitely erode.Advise them where shall they mobilse their hard earned retired corpus.
Nice coverage.. all around effect..
ReplyDelete