Even in a state like Kerala where very few items are produced locally, inter-linkage of businesses are hard to ignore
Local demand, within Kerala, is heavily reliant on two sources, remittances and tourism, which contribute ₹35,000 cr annually to state exchequer, but both sectors have been hit hard
MK Hamsa’s plywood factory on the eastern suburbs of Kerala’s Ernakulam is open for business, but he spends a bulk of his time taking phone calls from labour contractors, instead of actually running the operations. “I really don’t need more workers. Shutting down was so easy compared to this (opening up)," he said.
On many counts, Hamsa is lucky: 80% of his workforce, mostly migrants, has stayed back, and Kochi, the urban hub, which is just an hour’s drive from his factory, has largely opened up, considering that it has only a dozen active covid-19 cases (the lowest caseload among major Indian cities).
Despite those obvious advantages, Hamsa’s business is at a standstill. The raw materials (rubber trees) need to be procured with ready-cash, which Hamsa says he doesn’t have since existing orders are not moving.
“The orders were to be sent to big cities like Mumbai and Chennai, which are witnessing rising infections and are not receiving orders. Not a single load can be sent anywhere. All cities have not recovered like us. They are saying, ‘oh there is no way to pay now’," he said.
Despite resuming economic activity substantially, Kochi and its surrounding areas have realized that with the covid-19 outbreak, winning alone is no win at all. Even in a state like Kerala, where the manufacturing footprint is low and very few items are produced locally, inter-linkages of businesses are hard to ignore.
Hamsa’s Southern Plywood company is located in Perumbavoor, one of Asia’s biggest plywood manufacturing hubs, and a transport nerve centre, thanks to the British-era railhead connecting it to the erstwhile Madras province. The chemical and fertilizer manufacturing units in the area have also decided to wait it out for things to improve in the rest of India.
“This lockdown is not only impacting supply chains, but also demand," said Radhicka Kapoor, an economist with the Indian Council for Research on International Economic Relations. “Cities like Mumbai and Delhi have a larger section of the population who are relatively more affluent. We know retail activity is not going to pick up, malls are not going to open up. As long as metros remain shut, we won’t be able to capture whatever little demand there is."
Local demand, within Kerala, is heavily reliant on two sources, remittances and tourism, which contribute ₹35,000 crore annually to the state exchequer, but both sectors have been hit hard.
“Our future is connected to the world, not just Indian cities," said K.J. Sohan, a former mayor of Kochi. “Things need to improve elsewhere."
The port is, in fact, a central cog in Kochi’s local economy. And, much of the produce from the state’s plantation economy, from spices to tea, is exported via Kochi. “Export demand has fallen drastically. Despite our resilience in tackling the disease, normal economic activity may be affected at least for a year," Sohan added.
“Only when more and more cities get out of it (full or partial lockdowns), we can get closer to normal," said ICRIER’s Kapoor. This has prompted economies, globally, to adopt unique strategies. In the US, for instance, a group of seven heavily urbanized states on the eastern seaboard, including New York, have decided to coordinate better on opening up their economies. However, India still has no such regional plans to step out of the lockdown.
To tide through the times, Hamsa has started accepting small local orders, which he would not have taken otherwise, just to retain his migrant workforce. “Except for some 20 people, the remaining 70-75 workers are still here," he said. “If people (in other cities) don’t build houses or buy furniture, we are doomed!"
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