Thread,
Economics Post #CoronaLockdown.
It's going to be a great task ahead for us as Indians to be in a good economic shape faster once this #corona is controlled & the chain is broken.
I am hopeful that soon the govt will end this lockdown & will start the country as usual.
Economics Post #CoronaLockdown.
It's going to be a great task ahead for us as Indians to be in a good economic shape faster once this #corona is controlled & the chain is broken.
I am hopeful that soon the govt will end this lockdown & will start the country as usual.
It's interesting to see how we Indians behave and respond to this opening up.
The economy is a big chain of interdependent organizations, who are working together as vendors, suppliers, traders or as customers. And in that value chain the last ones are the end consumers i.e.
The economy is a big chain of interdependent organizations, who are working together as vendors, suppliers, traders or as customers. And in that value chain the last ones are the end consumers i.e.
We the citizens, who are also working for these small to big organization as their work force.
Take any product, e.g. a "car". The automobile company is just an assembling plant, most of the components are bought from other vendors and are just assembled at their factories.
Take any product, e.g. a "car". The automobile company is just an assembling plant, most of the components are bought from other vendors and are just assembled at their factories.
Again these vendors are buying their raw materials from some traders, or MSEM manufactures, these traders are buying from few other manufacturers and so on. Most of these organizations are based in India, well say upto 90% of any product is indigenous, may be rest are imported.
The above is what most of us know. What we don't know is, when I buy a car, I pay the money in full at the time of delivery, but the car manufacturer will pay his vendor, in a credit terms of say about 2-3 months later, and again the same thing will be repeated down in the chain.
Now in normal business cycle it won't hamper much as the no of creditors and debtors are well maintained by every organisation whether it's a giant corporate or a small time trader. But now since the lockdown, the money has not circulated,
the only essential commodity listed by Govt are working,but they will also work till they have stocks or till the availability of raw material is not hampered. Usually, every manufacturer keeps an inventory of 1-2 months use depending on the industry that he is working in.
Now once the lockdown is over, and the businesses start operating full throttle, the same issue of credit will surface. Imagine, a small manufacturer or trader, who has inventory piled up to sustain about a month, and who might have used his cash balance for running his home,
paying up emi and various salaries and other overheads. The logic of having an inventory will also be true to his all customers in the ecosystem so, for about a month, the demand will not pick up, and he will be put under burden to sustain,...
the same pressure again for 2-3 upto 4-5 months, till he actually starts selling his goods and gets his money in return. That will create a big vacuum of money in the business world, under pressure he will have to cut down on the cost of salaries, because that's the easiest of..
any other measures. Jobs will be lost. Or he may switch his supplier as the new supplier, by not paying the earlier one and enjoying a new credit term from the new one will further create the money vacuum. Or to take loans from banks, will put further pressure on money vacuum.
For service sector, they won't have cash to retain their talent. Few more months of credit pressure will again force them to take the same route of cutting the jobs.
Once it starts pinching the vendors, they will not have enough goods to sells, which will put a pricing pressure, eventually they will sell less to their customers, & eventually it will hamper the big guns, as they won't have enough to produce & put out in the market for consumer
On the other hand, the consumers who have burnt their pockets already by sitting at home, will have no money and mood to buy new consumable goods. Everyone will be in conservative mode. Many might have suffered a job loss too and demands will drop across the spectrum.
Prices will increase.
This will put pressure on the stock markets, and eventually investors will start taking out their money, making the stock markets crash further. As a result, again the cash rich companies will press a panic button and will lower the production.
This will put pressure on the stock markets, and eventually investors will start taking out their money, making the stock markets crash further. As a result, again the cash rich companies will press a panic button and will lower the production.
Leading to a disaster, an economic disaster or a slow down.
Hence I would request the cash rich corporates, on whom there lies a dependency of a pool of thousands of direct and indirect vendors, and their ecosystem, not to adhere to the existing credit terms.Just relax them..
Hence I would request the cash rich corporates, on whom there lies a dependency of a pool of thousands of direct and indirect vendors, and their ecosystem, not to adhere to the existing credit terms.Just relax them..
I am sure your vendor will be having a stock ready right now,just pay them in advance so that he can book for fresh raw materials for your next requirements. Your service vendor may be ready to serve you, just pay once the bill is raised, or if possible in advance
so that he could retain his talented employees to serve you better.
If you don't want to pay in advance, pay once the goods are delivered to you. If not on delivery, maybe you can take a few days more till the quality department gives clearance to the product,
If you don't want to pay in advance, pay once the goods are delivered to you. If not on delivery, maybe you can take a few days more till the quality department gives clearance to the product,
But don't keep a longer payment terms.
If every customer pays his supplier in the value chain on time, the economy will not get strained, money will start flowing seamlessly & early and a larger damage will be avoided.
If every customer pays his supplier in the value chain on time, the economy will not get strained, money will start flowing seamlessly & early and a larger damage will be avoided.
The next 4-5 months, after the lockdown is called off are going to be crucial. I will urge even the govt and finance minister to relax the tax recovery for a few more months, this will boost the MSME sector to a larger extent.
Even I request the bankers to extend the moratorium
Even I request the bankers to extend the moratorium
for about 2 months after the lockdown is called off. You trusted the select few and they ran away with thousands of crores, now pls trust the millions of small borrowers, they will be happy to pay even a higher rate of interest, but would want time at this juncture.
Dear govt, You made the life saving & sustaining goods available to citizens, pls make the most valued and important aspect, "money" available to Indian business fraternity. This just a small step of not carrying over the credit, will go a long way in building the nation...
and sustaining the economy.
I will be tagging this thread to few politicians and few business leaders, pls don't misunderstand me, I am not putting the onus only on them. The responsibility is on every Indian, of paying the due right in time to avoid the money vacuum.
I will be tagging this thread to few politicians and few business leaders, pls don't misunderstand me, I am not putting the onus only on them. The responsibility is on every Indian, of paying the due right in time to avoid the money vacuum.
car / automobile industry is just an example,
If you have read the above line that means you have great patience and patriotism and you have read everything that I mentioned. Pls don't hesitate to retwit, and share it on other platforms with or without my name.
Thank you.
If you have read the above line that means you have great patience and patriotism and you have read everything that I mentioned. Pls don't hesitate to retwit, and share it on other platforms with or without my name.
Thank you.
@threadreaderapp please unroll.
