 You're watching News Made Easy and I'm Anandya Chakravarty. Today I'm going to talk about something that all of us had kind of pushed at the back of our mind. Because we were so worried about surviving the second wave, that we didn't really think about the other part which is required for living, which is our livelihood, our incomes. And for people who are watching this video, many of you are probably salaried. Some of you have small businesses, some of you are self-employed. Some of you have bigger businesses and some of you work in big corporate houses. And all of you know that the situation is not good, right? There are lockdowns in various parts of the country and this is likely to continue for 2-3 months. The only answer India had was universal vaccination and that's not likely to happen before March, April next year. So we have almost another fiscal, at least one entire calendar year which is 2021, when the economy is going to face certain setbacks. Now, is this going to be a technical recession and what do I mean by technical recession? You know that a technical recession is when you have two quarters of negative growth between that the economy contracts. It might not be that, but still when it comes to your income, my income, it might be a mega recession, we might see a contraction of our income. Why am I saying this? Think about it, when there's a lockdown, we know what happens. Shops are shut, people don't buy things. Restaurants are shut, various dealerships are shut, cars don't sell, right? So what happens? People who are employed by these companies sooner or later, they have to take pay cuts. Sometimes they lose their jobs. We know that several companies again announced pay cuts, right? After this lockdown that has hit some of our metros right now. Because of that, even those who don't get pay cuts are not likely to get increments. And what happens when you don't get an increment? When you don't get an increment but prices rise, your real income falls. So if you've been earning let's say 1 lakh rupees per month in 2020 and you were spending 80,000 rupees. If there is a 10% rise in prices of the things that you bought, then what will happen? The cost, you'll be spending 88,000 rupees. But if you don't get an increment, your income stays at 1 lakh. That means that your savings go down by that much, right? So effectively your real income drops. And I'm talking about people who are relatively better off. That will be 0.5% of our population by the way. Now, again, those who are self-employed, if there's a lockdown, what will happen? If there's a fear, not just lockdown, fear. Things which are essentially services which depend on people coming and coming to the stores, coming to the restaurant, coming to a dealership, coming to a shop, those are going to be affected. And trade, hotels, restaurants, retail, wholesale, these drive a huge part of our economy, drive a lot of jobs in our economy. All of these people will be affected. It's very clear. What does that mean? When you don't have money in your hands, what do you do? You start reducing your consumption. There's certain things you cannot cut down on that you have to buy. And there are certain things which are discretionary, which you don't really need to buy. You can postpone. So that kind of consumption is going to go down even further, right? What does that mean? Companies won't be able to sell. And if they're not able to sell, their sales will go down. And when their sales go down, the only way they can retain their profit is what? One, they cut the salaries and wages, they cut their wage bill. The other is that they cut down on their other costs. Last year, there was a global slowdown. Remember that the slowdown and recession was global. What that meant is that raw materials were not being bought by companies, right? That is the case. Crude oil was not being used. Petroleum diesel was not being consumed. So all these things became cheaper, whether it is steel, whether it is crude oil, whether it is coal, whether it is cement. Anything that goes into making things, right? Plastics, everything, the demand fell. And because the demand fell, what happened? The total sales fell, but the cost of raw materials fell as well. Globally, cost of raw materials fell. What that allowed India's corporates to do, mind you, is to have higher than normal profits. Their profits grew because the wages were stagnant, right? But their costs in terms of raw materials fell. So even though their top line or their revenues dropped, they were able to make profits because their costs reduced at a faster rate. This year, the rest of the world is actually back on track. And they're going to make up for the lost consumption of 2020, right? So we know that we saw visuals of people dancing on the streets of Spain because Spain has lifted many restrictions. We know restrictions have been removed in Israel. We know in parts of the US, you no longer need to wear a mask. We know in UK, restrictions are being lifted. Many parts of Europe are gradually lifting restrictions. So what does that mean? Consumption is coming back there. Employment is coming back there. They are going to consume all these raw materials. And when they start consuming these raw materials, what is going to happen? The prices of those raw materials are going to increase. So here's the problem for Indian manufacturers and any Indian business which depends on any kind of raw material, whether it is electricity or petrol, as small as that, their costs are going to go up. But they mostly sell to India, right? Those who export will be in a good position. But those who mostly sell to the domestic market, they're going to face lockdowns. They're going to face reduced income for people. They're going to face a further contraction of demand in the economy. And what does that mean? They'll have to cut prices. So even if the raw material costs go up, they'll have to reduce prices. And what does that mean? This year, things will go reverse. Their profits will shrink. When they're profit shrink, two things will happen. One, they'll not be able to pay the salaries that they pay you. They'll have to cut that, right? They'll not be able to give you a bonus. If you're dependent on a bonus, they'll not be able to do that. Secondly, when their profits shrink, the stock markets will also react. Yes, money might flow into the Indian markets because there's a lot of money that will flow around in the rest of the world. But despite that, if incomes drop, if corporate incomes drop, if the profits of listed companies drop, the stock markets will either be stagnant or start going down. And once that happens, everyone who's invested in the markets or puts money in the mutual funds and has actually seen a very nice rise in their savings in the last one year because of the stock market boom in India, they're going to face a year when even that income drops, right? We know that the banks have cut down on interest rates. Interest rates are going to be low. So if you have your money in the bank, you're not going to get great returns. Returns of the stock markets might not be as high. It might even be lower this year compared to 2020. And you'll face a problem with your salary. And if you're self-employed, if you run a business, then with the profits you make in your business, so incomes will drop. So this is going to be quite likely a mega recession year for most people in India, even if the economy shows some growth, right? In terms of our income for large sections of the economy, people will face a contraction in their income. Their incomes will go down. And the only answer to that is if the government spends more. If the government spends more, puts money in people's hands, gives contracts to corporates and says, here, this is a thing you have to go and build this. This is what you have to make. Make this. Let the government build up inventories. Let it spend. And that money will flow into the hands of those who work for corporates, those who depend on, those who are vendors for big corporates, those who run small businesses. That is the only way this economy can revive. And that will mean more government borrowing, more fiscal deficit, even printing money, right? This is something that India has to accept. You've all been told that this is all very bad, fiscal deficit, printing money, this is all very bad. But now even big corporates are admitting this is the only way out. And hopefully the government will hear this and will be saved from not only this terrible second wave and a possible third wave that is being talked about, but also a second and third wave of dropping incomes.