- August 4, 2020
- Posted by: Anish
- Category: Feed
It is sometimes said that governments wasted the global financial crisis of 2007-09 by failing to alter economic policy after the dust settled. Nobody will say the same about the covid-19 pandemic. It has led to a scramble to ratify policies that only a few months ago were either unimaginable.
A profound shift is now taking place in economics as a result, that happens only once in a lifetime. Much as in the 1970s when Keynesianism gave way to Milton Friedman’s austere monetarism, and in the 1990s when central banks were given their independence, so the pandemic marks the start of a new era.
Each new era of economics confronts a new challenge. After the 1930s the task was to prevent depressions. In the 1970s and early 1980s the holy grail was to end stagflation. Today the task for policymakers is to create a framework that allows the business cycle to be managed and financial crises to be fought without a politicised takeover of the economy.
In India, during the pandemic, the silver lining has been the growth rate for the e-commerce industry, for each of the next four years, would surpass the same of established economies like the US, China, the UK, Europe and Brazil, according to Goldman Sachs’s review of e-commerce markets globally. The figure is a 27 per cent jump from the $81 billion it estimated in May 2020. The majority of this upward revision is contributed by the retail segment, which is estimated to reach $69 billion by FY20 compared with $47 billion earlier.
E-commerce in India is expected to register a growth of over 18% for the current year but estimates for 2021 and 2022 show a year-on-year growth rate of over 33% and 28% respectively. To compare, growth rates for the same period for the US are 17% and 19%, while it is nearly 11% for China in the next two years. To be sure, the market size base is bigger in both the US and China along with higher penetration of the total retail market. The pandemic is accelerating both growth and penetration of e-commerce further in these markets, including in India.
Along with this up-start brands are SELLING DIRECTLY to consumers that would otherwise have been crowded off shop shelves by larger rivals. By cutting out retailers, young firms have won brand loyalty and backing from investors who have poured billions into “direct-to-consumer” companies. Large food-and-drink companies, long content to rely on their prime position on supermarket shelves, are getting in on the act, too.
Among the sectors highlighted for e-commerce in India, the estimated online grocery is to be the biggest incremental growth driver for e-commerce with the segment expected to grow 20 times in India over five years to be of $29 billion in size (currently under $2 billion). While smartphones, electronics, large appliances have relatively higher online penetration, there is significant room for growth in categories like apparel, appliances, health & personal care, compared to economies like China.
In addition, India decided that it must decouple from China’s economy and try to strengthen its own industries. Imposing new restrictions on Chinese investments, and banning 59 Chinese mobile apps, India is also considering raising import barriers on up to 300 Chinese products.
In the new world order, the defining issue now is not just how the U.S. responds to the challenge of China’s rise, but whether “middle players” including India, Australia, Japan and Europe are prepared to take risks to defend the international order—and to work together in doing so.