Is demand dropping off or staying steady at this time. A big concern is to see how rural India is impacted because you are seeing reports of COVID-19 cases in smaller towns and villages, which are also reeling under higher healthcare expenses.
I will break up my answer in two parts. Firstly, we are seeing a K-shaped recovery where the formal segment of economy, organised players, bigger players are doing reasonably well. It is the unorganised segment, salaried class which is employed either in SMEs, unorganised segment which is getting hit the most. In the third and fourth quarter of the last financial year, we had seen unorganised segment actually getting back in terms of revival, but that has suddenly taken a U-turn. In fact, there is a spanner that is there. That recovery has stopped and we are seeing a decline. As a result of which, we are seeing pull down of the entire thing.
The second part: I see the demand getting affected in two ways. One, there would be essentials where we do not really see much demand getting affected. In fact, the demand is a little higher than the third-fourth quarter for essentials. But if you are talking about discretionary items, non-essentials like non-food, beauty products, maybe tourism, etc, I think that is where the affect is far higher and in this particular phase would probably push the recovery more than what we would have expected. We were expecting the other sectors, non-essentials to recovery by mid of this year which I think would be now difficult and probably go in third-fourth quarter of this year.
How are companies preparing for this? Obviously, there are staple products which people will continue buying, but any company in this space would be worried right now about how consumer spending is going to pan out.
As we speak, we are not seeing an issue. But, going forward we do not know how the demand would pan out post the second wave until a third wave. And if we are fortunate and do not see the third wave, going forward once we see the recovery from the pandemic. It is going to be difficult to predict.
There are two extremes that we are expecting. One, companies would have to really try very hard to ensure that they build demand; they generate demand through various means. Or the other extreme is that you will see demand coming in because that is something we saw in countries like China where there was revenge buying. If that happens, nothing like it. But that is one extreme that we are talking about. The other extreme being effort being put in by companies to ensure that they are driving the demand and not expecting consumer to flock back to their brand.
