The pandemic-hit $854-906 billion Indian retail sector, which exited FY21 at $780 billion, is likely to incur up to $30 billion in losses in FY22 as the second Covid-19 wave continues to take its toll on lives and livelihoods. Unplanned Covid-19 expenses, job losses, salary cuts and above all, negative consumer sentiment due to fear and bereavement issues are factors contributing to the Indian retail sector’s de-growth this fiscal.

“Unlike the last year’s national lockdown after which the economy had started to come back on the mend after Q1 (April – June) despite layoffs, salary cuts and furloughs; this time around the situation is much more bleak,” said Arvind Singhal, CMD of Technopak.

“A big chunk of consumer incomes have been spent on Covid healthcare, which is completely unplanned expenditure. Last year people lost salary but this time people have lost money that they have already earned or saved because of Covid-related expenditure. I estimate that this year, around ₹80,000 crore to ₹100,000 crore is out-of-pocket Covid expenditure.In the last six weeks alone with the second Covid wave, we are talking about 20 million (2 crore people) new tested infections, the first wave had only 6 million infections. Add to this at least another 20 million people who are not tested but would have had Covid-like symptoms, especially in rural India, and we are therefore talking about at least 4 crore people. If they spent between ₹20,000 to ₹25,000 per head (on medicines, consultations hospitalisations, ambulances, attendants from family) then it adds up to as much as ₹80,000 crore – ₹100,000 crore. So, there is that much less money in the hands of consumers to spend this year,” said Singhal.

Recovery only in Q2

Retail industry veteran Gibson Vedamani told BusinessLine, the Indian Retail sector will be badly hit this year and will suffer $30 billion (₹ 2.25 lakh crore) in losses and unlike last year, recovery will start only after Q2.

“As per RedSeer Consulting, India’s Retail sector exited CY2020 at $780 billion. I estimate this year, Indian Retail will drop to $750 billion due to many reasons. First, people are gripped with fear which will negatively impact the retail business as consumers go back to saving money for Covid-related medical exigencies. Unless the vaccination is fast tracked and front-end retail people are vaccinated, these fears will not go away. Retail businesses are facing a huge working capital crunch as there’s no sales because of no consumption as only food/grocery stores are open for just a few hours everyday. The manufacturing supply chain is completely clogged and none of them are working at full capacity as staff test Covid positive. Free flow of money has been affected because a lot of people in retail have been paid only 50 per cent of their salaries in Mumbai. We may see some green shoots of recovery this Diwali, but that will be only 20 per cent of the business done in 2019,” said Vedamani, CEO of Retail Solutions and Learning Technologies and Retailvarsity.com.

Consumption has dipped and no business is reporting that they are doing well , observed Kumar Rajagopalan, CEO, Retailers Association of India. “If vaccinations are completed in the next 3-4 months for at least 50 per cent of the population, then we could see businesses doing much better in September. We have seen last year, when things got controlled, retail has bounced back with a force,” he said.

“While April 2021 started off with positive consumer sentiment of +6 per cent, compared to -15 per cent last April and May; it has seen a sharp decline of 13 per cent (from +6 to -7) in May 2021 as people started realizing the severity of the tragedy wrought by the second Covid wave. However, people are mentally more prepared this time,” said Amarpreet Kalkat, CEO, Frrole AI, a consumer intelligence and digital insights platform.

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