Web-Seminar on – Dealing with the current challenges and determining the way forward to manage businesses - Infrastructure Construction & Equipment
COVID-19 pandemic can be compared to the butterfly effect, in that small things can have non-linear impacts on a complex system. The concept is imagined with a butterfly flapping its wings and causing a typhoon.
Of course, a single act like the butterfly flapping its wings cannot cause a typhoon. Small events can, however, serve as catalysts that act on starting conditions like the origin of Corona Virus in a wet meat market in the town of Wuhan transmitted from a bat to humans and this cascading effect which has impacted global health, international travel, global supply chain and above all the global economy.
While we all are aware of the disruptions caused by the pandemic, the question playing on everyone’s mind is how to move ahead post lockdown. Here, one of the keys to restart the economy would lie with the infrastructure and construction industry.
Construction halt, revocation of toll collection, labour crunch and severe working capital pressure – these nightmares for any infrastructure company have now become a reality. The infrastructure sector is one of the worst-hit on account on COVID-19 and for some companies, this might even become an existential crisis.
The more imminent challenge for the construction players remains working capital management. In the wake of COVID-19 pandemic, the focus of state and central govt has shifted to the welfare of citizens and hence infrastructure activity has taken a backseat. Infrastructure players are facing a severe liquidity crunch and as bills and dues from govt are not being honoured on one hand and on the other hand companies are striving to maintain steady salary flows to contract labourers and employees. The same has resulted in a stark mismatch in fund inflow and outflow, putting pressure on balance sheets.
After agriculture, the construction, infrastructure and real estate segments are the second-largest employment providers in the country. The infrastructure and construction sectors are highly responsible for propelling India's overall development and with intense the focus from Government for initiating policies that would ensure time-bound creation of world-class infrastructure in the country. In 2018, India ranked 44th out of 167 countries in the World Bank's Logistics Performance Index 2018. Foreign Direct Investment received in the Construction Development sector from April 2000 to June 2019 stood at US$ 25.12 billion, according to the Department of Industrial Policy and Promotion.
The lockdown has resulted in various infrastructure project sites staring at closure as it is mainly due to an effect on the labor movement due to the lockdown and also due to supply chain disruptions that may contract further as more states enforce COVID-19 lockdown. The fiscal situation in the construction sector for both the Centre and states is already worsening and continued funding of infrastructure capital expenditure will be a challenge in the near future. Additionally, all these problems will be further aggravated by the relief packages that are being rolled out by many states to support the loss of income caused by the lockdowns. This may further stress the government's ability to spend on the infrastructure over the next one or two years, further dampening the construction and the infrastructure segment.
Finance minister Nirmala Sitharaman recently announced that the state governments have been directed to use the welfare fund for building and construction laborers, which has around Rs 31,000 crore, to help those who are facing economic disruption because of the lockdown. The home ministry has now allowed construction activity after April 20, bringing relief to a labour-intensive sector that was ailing under the national lockdown following the novel coronavirus outbreak. The government announced that some construction activity will be allowed to resume. Construction of roads, irrigation projects, buildings and all kinds of industrial projects, including MSMEs, in rural areas, will be allowed after a review of the situation. This is a major development as it would help daily wage labourers get back to work sooner. Real estate experts said the resumption of construction activity from April 20 onwards, would send out a positive message to both investors, occupiers and homebuyers. It would ensure healthy cashflows at least for projects that are close to completion and unlock further investment potential.
In this context, Messe Muenchen India, the organizer of bauma CONEXPO INDIA, organized a Web-Seminar on – Dealing with the current challenges and determining the way forward to manage businesses - Infrastructure Construction & Equipment on Thursday, April 23, 2020 in association with NBM&CW as a media partner, moderated by Mr. Rajesh Nath, Managing Director, VDMA India and joined by esteemed panelists as follows:
Mr. Arvind Garg, Executive VP and Head Const & Mining Machinery at Larsen & Tubro Ltd.
Mr. Deepak Garg, Managing Director at Sany Heavy Industry India Pvt Ltd
Mr. Sakthikumar, Managing Director at Schwing Stetter India,
Mr. Devendra Kumar Vyas, Managing Director, Srei Equipment Finance Limited
Mr. Dimitrov Krishnan, Managing Director, Volvo Construction Equipment
As the captain knows how to take his ship through storm, the industry leaders in construction and infrastructure industry must guide their company through choppy waters and like the captain shed the unwanted weights to keep the boat afloat.
The construction and infrastructure industry employs more than 35 Mio people and contributes more than 10% to GDP of the country. Hence, I would like to state that the need of the hour is a real time collaboration between contractors, rental companies and OEMs for quick revival of the stalled projects and minimizing the liquidity crunch. This can be an accelerator for the growth of the economy after the disruptions suffered due to the lockdown. Alignment of projects with strategic interests like Healthcare facilities will be essential. India needs to be innovative in the months to have a V-shaped recovery. This would see revival in the consumer sentiments despite of the global economic depression, India as a nation, would have possibility to stand out with a GDP growth however small it maybe.
VDMA India thanks the experienced and reputed panelists, who shared their views on several topics and would also like to thank all our attendees which were more than thousand. And also conveys gratitude to Messe Munich India for organizing this web-seminar with support of the NBM&CW publication.