The COVID-19 adverse impact on Goan economy

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BY Abbas Raut

Coronavirus outbreak was first reported in Wuhan, China on December 31 2019.  Since then the global death toll from the deadly COVID-19 infection crossed 27,000 by March 27 2020. In India, the cases increased to 834 leaving 19 people dead. COVID-19 continues spreading in the world.

   India’s economy was already facing a slowdown and the hit from coronavirus has virtually added fuel to the fire. Business is at standstill as the lock down has brought the economic activity to a halt. Goa too is witnessing a severe impact on the economy.

  The Goan economy is dependent on the tourism and hospitality industry after the shutdown of mining industry. The coronavirus scare has affected tourism in Goa with crowds at its famed beaches thinning and hotels reporting cancellations.

  Although Goa is an all year-round tourist destination the state’s ’peak tourist arrival is during a particular period and usually starts from December and lasts till early April. However in recent times owing to the MICE segment and FIT traveler Goa has been receiving a critical part of its tourists in the peak summer and monsoon seasons.

  The Travel and Tourism Association of Goa (TTAG) held a meeting on March 19 to review the stringent curbs imposed by the state government in light of the COVID-19 pandemic and  estimated loss of Rs 1,000 crore to the tourism industry.

  The local hospitality industry has been a major source revenue generation for the economy and for the government. On an average the hotel industry in Goa earns its revenue from various factors, be it room rent (55 per cent), F&B (30 per cent) and other avenues such as banquets, conferences, etc. As per statistics of the Goa Department of Tourism there are 3,538 hotels comprising of 43,148 rooms and 63 star category hotels with 5362 rooms. Average room revenue per night generated by upper scale, mid-scale and economy hotels is Rs 10,000, Rs 5000 and Rs 1,500 respectively.

  The average occupancy during this season is approx. 60-75 per cent whereas in current situation the occupancy is 5- 10 per cent which will amount to a loss of  Rs 500 crore assuming that the lockdown continues for two months. Ground level check from hotel operators reveal that, they expect nil to max five per cent occupancy over the next three weeks.

  The Goa government has collected Rs 411 crore in revenue from onshore and offshore casinos in the state in 2018-19 and the same is likely to be adversely affected in 2019-20 and 2020-21. Due to shutdown of the casinos the government might end up losing Rs 70 crore in the combined period of shutdown. Additionally, all other entertainment streams such as night clubs pubs will have a loss of revenue. The approx. business done by the recognized pubs across Goa during this period was valued to be approximately Rs 15 crore.

  Since Goa is a tourist hub, most of the livelihood depends on ancillary services like the taxi business and other allied services. An individual taxi operator’s average turnover during this season is Rs 1,000 per day and there are about 32,000 taxis listed apart from private taxi drivers.   With the decline in tourism, taxi business has also shut down and with the announcement of country wide lockdown the taxi business has gone to zero facing an approx. loss of Rs 100 crore considering severally reduced business from March to May 2020.

  Pharma sector has emerged as the single largest industry after the ban on mining and the slowdown in tourism in Goa. Currently there are over 7000 small scale industrial units with presence of more than 150 large and medium scale industries employing over 25,000 people directly or indirectly. In Goa almost 90 per cent of the products and formulations manufactured are exported.

  According to the Goa Pharmaceuticals Manufacturers’ Association (GPMA) the annual turnover of the industry in the state stands at around Rs 10,000 crore.  However, in the midst of the coronavirus outbreak the Indian government has put restrictions on exports in order to ensure adequate supply in the domestic market. This will have an impact on Goa’s exports. Similarly the lockdown has resulted in discontinuing of operations of several pharma companies which shall definitely result in loss of revenue during this period.

  An important contributor to the economy in recent times has been the MICE (Meetings, Incentives, Conferences, and Exhibitions) segment in tourism. With the lockdown this segment has been virtually paralyzed. Cancellation of events, functions, parties etc. have not only affected the hospitality segment but also has had an impact on venues rentals, catering other allied businesses such as decorators, video and photographers etc.

  As per our research, there are around 10,000 events which happen every year out of which 3,800 are premium events, 1,900 family functions, 1,400 MICE event, 400 are destination weddings and 100 are other events such as educational, art and culture etc. In such events premium catering is demanded. In a year premium catering generates revenue of  Rs 132 crore  excluding the revenue generated from normal catering which is approx. to be Rs 150 crore.  

  Hence considering a lockdown of two months the expected losses are valued to be Rs 30 crore.

Goa has about 22 industrial estates that are home to MSMEs. In addition there are several different private companies, commercial establishments spread across the state.  With the businesses being closed disruptions in income from the local industry look inevitable.

  In addition to the above, an average consumer spends on leisure activities. These could be on travel, malls, cinema and food and beverage. With the lockdown and the continuance for about a month it is expected to cause a loss of Rs 150 crore considering an average spend of Rs 1000 per month on such activities. 

   It is obvious that the effects will be seen for a quarter or two post the outbreak. Businesses and consumers will take some amount of time to regain normalcy. The immediate reaction will be to rebuild and be conservative in spending. Savings shall be the key word and hence economy will be further hit as cash flow in the economy will be an issue.

The writer is an associate in Panaji based financial advisory firm, Mangal Analytics and Research Consulting Pvt. Ltd.