Well, only time will tell. But industries that are able to adapt and cater to the modified consumer requirements in the WFH scenario will stand to gain.
The 2008 global financial crisis paved the way towards the worldwide strengthening of the financial sector, the 1991 Budget speech by Dr. Manmohan Singh led India on the path of liberalisation, and now, the COVID-19 crisis may lead to structural changes in how we lead our lives. I like to call these moments as ‘inflection points’ and it’s imperative to understand the shifts these moments lead to—in this case, in our lifestyle, due to the Work-from-Home (WFH) set up.
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If the threat of the pandemic goes away, then altering our lifestyle for the longer term, may sound like a far-fetched idea. However, WFH might still continue as an on-going activity for working professionals even post corona. According to a new working paper released by the University of Chicago, up to 37 percent of jobs in the United States can be plausibly done from home. Sectors high on the list are education, scientific and technical services, business management, finance and insurance, and information services.
Initially, there were concerns about work being adversely impacted due to WFH. Will productivity go down? Do our homes provide the right infrastructure and atmosphere for work? But guess what! We are saving on commuting time, unimportant meetings are getting done within two minutes, client meetings are being seamlessly conducted on Zoom/Microsoft Teams and so on. For instance, our team of Investment Advisors’ are successfully conducting, on an average 2.5 times the number of client meetings with the same efficacy, owing to as simple a reason as saving on commuting time. This leaves us with more disposable time for our fitness/hobbies/family, which, over a longer-term will boost our overall well-being and productivity.
From the company's point of view, WFH could help improve bottom-lines. For instance, Rohit Kapoor, CEO at EXL Services, expects the average cost of an employee in analytics & BPO companies to decline to $18,000-20,000 annually from current levels of around $24,000 in a WFH set-up. Sarabvir Singh, CEO at PolicyBazaar.com, says that the fully loaded cost towards their 13,000 employees tends to be around 1.25-1.5 times of the employee's salary and that this expenditure can come down drastically if WFH is implemented.
WFH does seem like a boon but let’s delve deeper and understand its side-effects as well. Below, I have attempted to find out how changes in my own lifestyle and purchasing habits, when extrapolated to the larger audience in India might impact certain sectors of our country if WFH continues even post corona. I’ll begin by describing the new normal workday for me.
Isn’t this the ‘New Normal’ for all working- from-home professionals? Our regular requirements will not only see a significant drop but the inherent nature of the requirements will also change. This will lead to disruption in various industries around the globe and only those that are able to innovate and adapt will eventually survive. Sounds farfetched again? While it might sound like it in the first reading, but we have already witnessed many well-established brands going bust in the last three months. Some might argue that the reason for this is the lack of demand during the on-going crisis, but I believe WFH will eventually make us realise that most things we own or purchase in our frequent shopping sprees are not only a waste of money but also that long until today, we have been quite inefficient in our usage of the limited resource this planet has to offer.
To put things in perspective, below is the list of a few companies that have filed for bankruptcy in the recent past and the industries they belong to. A pertinent observation is the overlap of industries impacted due to change in our daily lives (as discussed above) and the industries in which the bankruptcies have occurred globally. While this could be coincidental, I believe that the WFH set-up has expedited the collapse of companies that were already in financial stress.
Possible impact on Indian GDP
While the recent measures taken by the Indian government have been effective to an extent, some sectors are bound to see a lasting downward impact. For instance, Ola-the largest player in the Indian ride-hailing market has announced that the company will have to lay off 1400 of its workforce as the revenue in the months of April and May fell by over 95 percent. If one of the most vouched upon Indian start-ups, couldn’t sustain for a period of 60 days, we can imagine how badly this pandemic will hit other new setups.
A recent Nasscom survey mirrors our fear; the survey points out that over 70 percent of Indian start-ups have less than 3 months of cash runaways and a staggering 40 percent of start-ups have either temporarily shut down operations or are on the verge of shutting down completely. The Indian real estate industry has started to face the heat of the changing landscape with net absorption of commercial real estate across the top 8 cities declining over 73 percent from a year ago and 49.5 percent on-quarter, according to data shared by Cushman & Wakefield. India’s fashion and apparel sector has recovered only 35 percent of sales compared to January levels, according to a study conducted by Redseer Consulting.
Some examples of industries that will be positively impacted due to WFH in the longer term are—household appliances, hygiene products, organic/healthy F&B, real estate in the suburban areas (since we no longer need to stay close to office at higher rentals), comfortable workwear (many office wear brands have already introduced their easy and comfortable WFH edits) and travel & leisure (we all need a break from home, too!). The same sectors will also be will be negatively impacted—commercial spaces, textiles (office wear), office appliances, and road transport. These are just a few sectors that I have taken into consideration to study the consequences of WFH. These sectors contributed to around 21 percent of Indian GVA 2017 as below:
While the definite impact of WFH on the economy is difficult to ascertain, I have attempted to understand the contribution of some of the possibly affected sectors to the economy. In my opinion, industries that are able to adapt and cater to the modified consumer requirements in the WFH scenario will stand to gain.
So this brings us back to the main question. Is WFH a boon or curse for the economy?
Well, only time will tell.
—By Raveendra Balivada is Head of Investment Advisers, HDFC Securities. The views expressed are personal
First Published: IST