Part 2: Show me the money

We've been hearing some real doomsday predictions. The IMF (International Monetary Fund) projects that the world economy will contract to -3% in 2020. This is much, much higher than what happened during the financial crisis of 2008-09; when global GDP growth shrunk to -0.1%.

But break it down a bit, and a different picture emerges.

India is expected to grow at about 1.9%, while markets like the US, Europe and Japan shrink by between -5% to -7.5%. But that's not all:

While India's growth will drop from last years 4.2% to 1.9%, it is expected to rebound to 7.4% for the year 2021.

What truly makes this current situation interesting is that it represents a unique window of opportunity for India and Indian entrepreneurs. For Revenues: both B2B and B2C.

Opportunity: Revenue from Businesses

China has long been seen as the manufacturing hub of the world. In 2018, China commanded 28.4% of the world's global manufacturing output, ahead of the runner up (the USA) at 16.6%. India ranked sixth, at 3%.

The COVID-19 pandemic has already seen this beginning to shift. While reports of over a 1000 companies planning to move manufacturing from China to India might be optimistic, globally the trend has begun. Japan, for example, has set aside over $2 Billion to assist companies shift production from China to "Japan, or any other part of Asia". Samsung recently declared its intention to invest close to half a billion dollars in manufacturing display panels in India. The government of India has declared its intent, through policy measures, to encourage "300 plus foreign manufacturers" to set up base in India.

I feel this shift will accelerate, perhaps as soon as Q3 (the JAS quarter) of calendar year 2020, when we will begin to see more manufacturers eyeing India as an alternate location to China.

What does this mean for entrepreneurs in India? As of December 2019, India had approximately 1,600 global in-house centers (International organizations), generating a little over $12 Billion in revenue to domestic companies. With a growth in this number, this GIC spend is estimated to increase. Opportunities lie in areas like mobiles, electronics, healthcare (mainly medical devices), textiles and synthetic fabrics.

This promises more opportunities for Indian entrepreneurs to service these new organizations that will be seeking partners for mutiple requirements: from employee discovery and hiring, to logistics and transport; and from day-to-day services to high-technology offerings. Entrepreneurs in the B2B space will see potential new business; provided they can position their offerings to serve new entrants into India, and help them not just accelerate their development activities, but also cut their operating costs.

Start building case studies on how you have assisted enterprises in cutting costs or speeding up their operations.

Opportunity: Consumer revenue

Now this is a little tricky to forecast. Experts forecast that discretionary spending will reduce, but give no indication of how much it could go down by. Others say that health-consciousness will increase, and therefore spending in this area will increase.

But there is a strong possibility that once transactions in "non-essential" goods are allowed, whether in physical retail or through e-commerce, there will be an initial spurt in this space.

In the personal-use (clothes, toiletries and make-up etc) and common house hold goods categories (specially consumables including food take-aways), there will be a sudden spurt in orders. Pre-COVID demand rates would be reached quickly, and will remain steady. Delivery capabilities of entrepreneurs will be tested in these areas.

However, demand for other categories of goods (such as mobiles or televisions) will probably decline sharply after an initial spurt; and become "occasion" driven. Driven by lower consumer disposable income caused by salary-cuts or loss of jobs, these will be more of cautious purchases.

Spends on "digital" products for home such as entertainment (which boomed during the COVID phase) will stagnate, and after the renewal period is over, perhaps will not be repeated; primarily because of a drop in "free time" available to consumers post COVID.

As an entrepreneur serving consumers, be aware of what sectors will boom, and what will decline. Ask yourself whether the categories you offer to your customers will remain "daily or weekly consumables" or "occasional purchases". Plan your delivery capabilities post COVID accordingly.

Parting thoughts

The post COVID recovery period offers interesting medium-term opportunities for entrepreneurs, if they can plan ahead for servicing these demands. But I also anticipate that brand loyalty (which is already low in many categories in India) will decline further to include consumer brands too; spurred by a reduced wallet size.

I have not talked about a key component of "Money" in this article: investments. This will be covered in the next article on Preparing for a post-COVID world.