Is India Ready For Another Gujarat 2001?

On November 13, 2016, while most Indians were busy exchanging their old notes at the banks, in another part of the world, New Zealand was rocked by an earthquake of magnitude of about 7.5 on Richter scale. About 232 aftershocks of the event were recorded in the country by GeoNet, leaving thousands of people stranded near the epicenter.

It brought back haunting memories of what happened in Gujarat back in 2001 and once again raised the question: Are we ready for such disasters?

What Happened in Gujarat?

While the whole nation prepared to celebrate its 52^nd Republic Day, Gujarat was shaken awake to one of the worst disasters in the history of India. On the morning of January 26, 2001, an earthquake of magnitude of around 7.9 hit this western state at 8:46 am.

It was a result of the Indian plate pushing towards the Eurasian plate in the North. Although the quake lasted for only two minutes, it claimed over 18,000 lives and 167,000 people were left injured.

The Destruction Caused

• Out of the 25 districts of the state, 21 were completely destroyed.
• Kutch was the most affected area and reported around 17,000 deaths.
• 7,065 children and 9,110 women were reported dead.
• Around 348 orphans and 826 widows were registered. While some were protected with life or term insurance, many were left financially crippled.
• The collective economic loss was around Rs. 99 billion.
• Out of those who were injured, a vast majority was left handicapped.
• Around 8,000 villages were affected and more than 3,000 health facilities were destroyed.
• Over 12 million houses were damaged, leaving thousands of people homeless.
  

The Response

It took years for Gujarat to recover from the disaster. The Gujarat Model of Development was formed to help the health, educational and industrial sectors reach new heights. About 300 international and 150 local NGOs were involved in providing assistance. Financially too, millions of dollars were used to make things normal again. Immediate relief of Rs. 500 crores was announced by the NCCF.

What transpired in New Zealand has once again underlined the importance of better future planning. Today, Gujarat stands strong but policies like term insurance and life insurance are the need of the hour to protect the financial future of your family.

To get these services is easier than it was ever before. Many banks these days also provide instant loans that can be used in times of crisis as well.

Liquidity Crunch? The Solution Lies Here

When Prime Minister Modi gave a 40-minute speech on November 9, 2016, announcing the demonetization of Rs. 500 and Rs. 1000 banknotes, the 1.3 billion people of India were taken totally unawares!

There was panic and chaos among the people, since almost 80 percent of the monetary base was wiped out in one fell swoop. What could once guarantee the most upscale clothes and lavish meals, was merely a useless piece of paper now.

While the positive effects can take time to materialize, in the short term, most people are having to bear the brunt of this drastic move. This is especially true for small and medium sized businesses that function largely on liquid cash.

If your business is also suffering due to a liquidity crunch, it is time to consider solutions like bill discounting. Here is what you should know about this solution.

Why is Liquidity So Important?

Now let's talk about the importance of liquidity. Businesses thrive on capital. Without adequate financial support, they are unable to meet their everyday requirements for smooth functioning and revenue generation.

For instance, in order to ensure uninterrupted business functions, business owners need to pay their employees salaries on time, electricity and telephone bills need to be paid, loans need to be cleared, raw materials need to be procured, office stationery needs to be replenished, and so on. While bills and salaries can be transferred directly from the bank, paying vendors and suppliers might be an issue at the present moment.

So, what is the Solution?

Imagine this scenario – you have rendered services to one of your clients and received bills of exchange worth Rs.50, 00,000. But the payment is pending for nearly 3 months, and you require funds right now for your day to day business requirements. You know that it is useless chasing a client for bill payment at a time when they too are facing the same liquidity crunch as you. So what will be your immediate step to tackle this issue be?

One option is to apply for a loan. However, this means that you not only have to fulfill all the eligibility criteria, you also have to find a way to repay the loan amount along with the interest rate. Why burden your business with more liabilities? It is time to reduce liabilities with options like bill discounting.

This facility enables you to trade your receivable in exchange for cash. Also known as invoice discounting, the financial institution takes over your pending invoices, pays you what is due minus the fee, and thereafter the headache of getting money out of the client lies with the NBFC or bank.

The same holds true if you need to pay pending bills. In this case, you could apply for trade finance and tackle your liquidity crunch with ease.