In post covid India, big business is getting bigger and smaller businesses are being destroyed
From：Taipei World Trade Center Liaison Office In Kolkata
The Reserve Bank of India (RBI) has estimated that the loss in economic output caused by the second wave of the covid-19 pandemic will be around ₹2 trillion.
The central bank's latest monthly state of the economy report says this happened primarily because localized lockdowns hit consumer demand. Also, the second wave spread to smaller cities and villages, impacting rural demand, something which hadn’t happened during the first wave.
Having said that, the RBI remains largely optimistic of the future of the Indian economy. It even quotes late British prime minister Winston Churchill to make its point. As Churchill said: “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
Nevertheless, the optimism of RBI is tempered with some pessimism as well. As the central bank points out: “Life- and work-style transformation such as increased remote work and online shopping may likely endure. When patterns of demand shift, some firms may face closure. Some industries may become permanently smaller."
In fact, this is already happening with many small shops and micro, small and medium enterprises (MSMEs). A recent Business Standard report said nearly 10,000 small mobile handset retail stores in India have closed down during the past one year. This is around 8% of the total 120,000 stores that were there earlier.
This is on account of localized lockdowns leading to a loss of regular business for these small shops, which has been captured by big e-commerce companies. This is how a free market works. When an opportunity presents itself, those who are in a position to capture that opportunity, try and do so.
As David Boaz writes in The Libertarian Mind: “The point of economic activity is consumption. We produce in order that we may consume. We sell in order to buy." But what’s good for the consumer comes at a cost and the cost in this case is being borne by the smaller mobile phone shops going out of business. Surveys suggest that many MSMEs across the country are in trouble. A survey carried out by LocalCircles points out: “Only 22% startups and MSMEs have more than three months' runway; 41% are out of funds or have less than 1 month of funds left, and 49% plan to reduce employee compensation and benefits costs by July."