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Home / Opinion / Views /  Opinion | Fathoming with the new normal

Who could have imagined that life as we knew and lived would change so drastically in a matter of weeks? That our daily routine, the way we met, greeted, collaborated, and conducted business would seem like a thing of the past – and lockdown, self-isolation, social distancing would become the new normal? And all because of a virus as small as 0.000125 millimetre?

For the first time in recent history, we are seeing not only a financial downturn, but also a physical slowdown as factories and commerce shut down and the movement of goods and people slow down everywhere and stop in many places, even if temporarily. The ferocity of the onslaught has given countries and companies little time to react.

Sure, as with all such dark phases in human history, even this will pass, and mankind will begin to pick up the pieces, hopefully before long.

The question is – where will this leave our economy, especially the infrastructure sector, which has been hit hard?

Market reports suggest that globally, air travel is likely to drop 30% or more on-year in 2020, and it could take 2-3 years to get back to 2019 levels.

Toll roads across the world, including China, India and USA, are suspending toll collection, either voluntarily or via edict, compounding the already dramatic decline in toll revenues due to lower traffic.

Container terminals are reporting dramatically lower volumes. A number of ports in India have already invoked force majeure due to the lockdown.

Clearly, depending on how long it takes to bring the virus under control, 2020 will see a substantial decline in global economic activity, across countries.

A closer look at the aviation sector reveals the imminent pain.

Recent data for global publicly listed companies shows that in the month since February 19, 2020 (the day the S&P 500 peaked), global airlines had lost over $150 billion in market capitalisation (the Visual Capitalist https://www.visualcapitalist.com/covid-19-downturn-beach-stocks/), with the rest of the travel and leisure industry losing perhaps as much.

According to the International Air Transport Association, air travel has closed or is shutting down for most parts of the globe. Markets with ‘severe restrictions’ account for 98% of global passenger traffic, resulting in a drop of close to 40% in revenue passenger kilometres and a $250 billion revenue loss in 2020 alone.

More worrisome is the fact that among global airlines, players beyond the top 30 have high levels of debt and low cash holdings.

In the context, we see the emergence of three trends, and the imperatives thereof, for businesses around the world.

One, force majeure playing out in a way that is unprecedented and, in most cases, warranted. For once, borrowers, lenders and regulators alike will have to come together and work out the issues, as a team, instead of adversaries. The sooner all parties recognise this, the sooner we will recover and the faster we will begin to put this current downturn behind us.

Two, firms, nations, governments, leaders and all of us beginning to reassess supply chains. Many countries that are large enough or diverse enough (such as the US or India) will look at diversifying their supply chains, and in many cases, focus on national sourcing. Others, which are part of a larger region (such as the EU), will look hard at regional sourcing. Economics, which is always paramount, will likely be joined by security and risk mitigation considerations. In India, for instance, Mom and Pop stores are suddenly bustling with activity as the lockdowns shut down malls and hypermarkets. Does this mean more local? More global? Maybe more glocal?

Three, many countries – even some labour-surplus ones – focusing on the use of artificial intelligence, robotics and remote operations. The whole notion of contingency planning will acquire new importance.

Sure enough, human beings are adaptable, and will cope. Forced by necessity, people are adopting new ways of working. Our old patterns of mobility and movement have been redefined in recent days and, in many cases, collaborative tools such as video conferencing and tech-enabled project management tools have taken centre stage. Both givers and receivers of these services have accepted this as the new normal. Perhaps a brave new world has begun?

Jagannarayan Padmanabhan is Director – Transport & Logistics, CRISIL Infrastructure Advisory

Ram Mahidhara, Founder & MD, EMIS Consulting LLC

The views expressed here are author's own

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