Mohandas Pai in conversation with Sanjay Nath of Blume @ BHIVE Buzzfest

By Published On: May 3rd, 2020Categories: News5.9 min read
Nithin Kamath, Mohandas Pai at bhive

Conversation between Mohandas Pai and Sanjay Nath during BHIVE Buzzfest event of 1st May 2020

Effects at Macro Level

● The global economic crisis of 2008 was not as global as the COVID-19 crisis, says Mohandas Pai. Almost every country in the world is affected now.

● The virus has uncovered the vulnerability of the global economy due to the plight of the supply chain in China which contributes approximately 24% to global manufacturing. Over-dependence of the world on China got exposed.

● Global oil industry has collapsed with plunging oil prices because of non-existent demand with an excess supply of oil. Saudi Arabia and Russia have had major conflicts.

● The power of technology has emerged as people can work, purchase, and educate themselves sitting at home. This may translate to new and changed habits and behaviour for a foreseeable future.

● IMF estimates that the $82 trillion work economy may shrink by 3-4% implying a loss of approximately $3 trillion. In addition, for the first time since the great depression, the USA has 36 million people unemployed.

● USA and Europe among other nations have given trillion dollars of stimulus packages to stabilise their economies. The increase in money supply should raise inflation and drive down interest rates to negative. However, inflation will remain low due to muted demand.

Mohandas Pai’s take on Impact on Indian Economy and Government Initiatives

● The impact on Indian economy is undoubtedly unprecedented. Economy is at a standstill with the nationwide shutdown. This impact can be gauged by the fact that for the first time not a single personal car has been sold in a month’s time and approximately 3 crore people may not get monthly salaries.

● India’s $3 trillion economy may lose approximately $30 billion sizes witnessing negative growth for the first time. In addition, there may be negative inflation with deeply dampened demand.

● The Government may reduce interest rates to stabilise the economy by bringing liquidity and is giving stimulus packages for the poor. It is also considering a stimulus package for MSMEs to revive some economic activity by the third quarter. One significant step that it must take is to devise a large reconstruction budget to build infrastructure to lift the economy.

● Government should give both Income tax and GST refunds to MSMEs as liquidity has dried up for many smaller companies. Government should start a grand guarantee scheme for MSMEs to get working capital loans from the banks. These steps will aid the companies to restart their business. Central Government should also give the promised 14% GST compensation to states as they have run out of money.

What lies ahead for businesses?

● All businesses should operate in survival mode. It means to reduce costs, hold teams together, adopt technology, relook at internal processes and strategies.

● Companies should embrace technology as more and more people will increasingly work from home to keep the work culture, health and safety in balance.

● Many more customers are adopting technology and searching online for goods and services. It means that both B2B and B2C companies that were spending months of time and millions of money on marketing and discounts to reach customers can acquire customers faster at low cost. This gives an opportunity to reassess the economic and business models. For example, discounts are disappearing as people are willing to pay higher prices as there is no other option.

● For tech startups, it is an opportune moment as many people have started using technology more in daily life and for businesses. Startups should develop strong systems, conserve cash and train people.

● Entrepreneurs must communicate regularly with their investors to keep them abreast of the progress and challenges. They should convince investors to invest money so they can build a runway for 6-9 months to survive.

● Productivity will increase as people will spend less time commuting and work from home more.

● There will be intense competition as consumers may start downtrading and shift to more value for money products. Hence, big companies with huge brands may not be able to sell at a premium.

● JIO mart will be colossal as it plans to aggregate three crore Kirana stores on its 12 platforms and these stores may start their home deliveries in their neighbourhood. On the other hand, JIO’s bargaining power with suppliers and producers will shoot up as it will aggregate purchasers too.

● Infrastructure development will speed up as there will be fewer vehicles on the roads resulting in an increase in productivity that will allow companies to compete much better.

● Office space leasing market may not suffer much as people will still need offices but with more social distancing.

● Residential Real estate demand may be delayed but people will still need larger houses as work from home becomes a new normal. There is an abundant unsold and under construction inventory. Hence, houses can be sold at a discount to reduce this inventory.

● Businesses have many opportunities open as the trade may shift from China and investors look to diversify geographically. However, what we need from China is to get high tech industry manufacturing in India. China became dominant by partnering as a contract manufacturer with western companies. Now, the cost of labour is high in China and most industries are fully automated using robotics. Hence, brands and companies will be indifferent as the costs will be the same given that India can develop infrastructure and achieve volumes. India’s time has come.

● India has validated its prowess by facilitating 4.5 million people to work from home with lakhs of computers shifted to their homes in a matter of ten days. With a surge in data usage, companies have harnessed the power of India’s strong telecommunication infrastructure. Unlike other advanced countries, India has strong tech solutions such as e-learning and e-health. Therefore, India can not only become a preferred country for manufacturing but also can export digital services.

● China can be seen as a threat and dominant, whereas India could be seen as a partner.

● Cybersecurity and privacy are going to be big things this year.

● Coworking and coliving cannot be as dense and would need to provide more space to their customers.

● Mental Health-related industry will grow strongly.

● Outsourcing will increase and distributed work needs to be effectively managed as many companies will become virtual companies.

● Global Corporations with large workforces situated in a particular location will shrink.

What are investors looking for in companies?

● Investors will see how companies have brought changes in their business models. For example, if they have reduced costs, embraced technology, scaled up rapidly with increase in productivity, suggests Mohandas Pai.

● New startups have an advantage as compared to unicorns or big startups because they can easily factor in these challenges. They should try to get angel funding to show traction.

● The strategy should be to remain customer-focused, reimagine ways of selling and be creative as not all industries are fully digital.

● The gig economy will expand with less people on the company payroll and more will work on a contractual basis, concluded Mr. Mohandas Pai.

Mohandas Pai

Full Video of the Mohandas Pai session available at Bhive Workspace Facebook Page

Share This Blog, Choose Your Platform!

Green buildings Workspace BangaloreGreen buildings being rented as offices | BHIVE
Nithin Kamath, Mohandas Pai at bhiveDr. Rohini Katoch Sepat, IPS with Shradha Sharma @ BHIVE Buzzfest