Small Businesses, Farmers Push Demand In Pandemic-Hit Economy

Manish Mehra, owner of Washex Hospitality, an industrial laundry service, recently flew from Delhi to Jodhpur to win a contract to service a large, government-run hospital – a move essential to kickstarting his business.

“For a new relationship, it is essential to know each other before you can establish the trust and confidence to work online and that need is higher in case of government departments,” said Mr Mehra, who had to stay for a week in a Jodhpur hotel.

Increased demand for air travel and hotel stays by small business owners like Mr Mehra, accompanied by a rise in rural incomes and spending after two good monsoons, is helping the pandemic-hit Indian economy slowly recover.

Government data released on Friday showed the economy shrank 7.5 per cent in the July-September quarter, performing better than analysts’ expectation of an 8.8 per cent contraction as lockdowns were eased and some pent-up demand was met. In the April-June period, the economy shrank 23.9 per cent.

Annual growth of 3.4 per cent in farm sector and 0.6 per cent in manufacturing during the September quarter has raised hopes of an early recovery and some service sectors such as trade, hotels and transport contracted at a much slower pace compared with the April-June period.

Farmers, benefiting from a bumper crop, are lapping up tractors while demand for personal vehicles, due to a lack of public transport and the need for safer travel options, has boosted sales of cars and motorcycles.

There has also been an uptick in goods and services, tax collections and higher energy consumption.

A recovery is taking shape and it has been led by the manufacturing sector which has moved from near annihilation in the July quarter to rebound mode, said Yuvika Singhal, an economist at QuantEco Research.

“Until there is a stronger recovery in high contact service sectors, which make up 60 per cent of the GDP, agriculture and manufacturing are expected to carry the growth,” said Singhal, adding that India is still growing on a lower GDP base and it will take more than a year to recover lost output.

Slow Start For Hotels, Airlines

A string of Marriot hotels in industrial towns like Sriperumbudur, Visakhapatnam and Nasik are operating at 50 per cent to 60 per cent occupancy with the bulk of guests working with domestic manufacturing companies, said Ashish Jakhanwala, CEO of hospitality firm SAMHI, which owns the properties.

Meanwhile SAMHI’s hotel in the tech-city of Bengaluru, that mainly depends on large corporates, is filling only 20 per cent to 30 per cent of rooms.