Sri Lanka's Economic crisis

After getting independence from Britisher's in 1948 many countries were looking towards Sri Lanka in a very optimistic way because it had  a very large export of rubber, tea and coconut. But major disadvantage of the island nation is that they had 90% exports based on plantation. So, if plantation goes in problematic situation then country suffers heavily. In 1955, when rubber & tea prices surged down in international markets Sri Lanka faced it's first ever Forex reserve crisis. 

One of the inaptitude of Sri lankan government is that whatever money they got from exports development of the country gets only 10% share and 90% share is allocated to welfare schemes. This gives us short-sightedness of lankan government. Due to this, after sometime they ran out of money and to run certain schemes and for fulfillment of the stated reasons lankan government started to raise debt.

In 1962, government taken actions to mitigate the economical risk under the name of  "National Planning Council" (NPC) which could contribute towards the long term vision of the country but during elections that time present government again focused on freebies to attract people and dissipated NPC. In 1977, government started to work on developmental schemes, bringing FDI's, diversification of the export and eliminated food subsidies, which resulted into growth rate of 6% per year from 1977 to 1983 which was previously stuck at 2%. This affected country's tourism in a constructively. It became three folds in 1982.

But in July 1983, a cataclysm raised it's head in the form of civil war in the country, which put the whole country into the fire. Due to this lankan government diverted it's budget to defence. In 1982, they had 4.4% expenditure of the budget on defence and it raised up to 21.6% in 1996. Civil war negatively affected the island's investment from MNC like Motorola and Harris corporation.

As we can see financial crisis is not new incident for Sri Lanka, till now IMF bailout this island nation 16 times, but this time reasons for economic crisis in Sri Lanka is due to varied factors, which are as follows:

1) Tourism collapse: Not only covid-19 is a reason of tourism collapse but before it there were few reasons which hampered tourism industry of Sri Lanka. In 2018, Sri Lanka was one of the top tourist destinations in the world, around 2.3 million tourists preferred Sri Lanka as there holiday destination. But in april 2019 Sri Lanka was bombarded with multiple bomb attacks which came to be known as 'Easter day Bombings'. Total 290 people were died and 45 of them were tourists. This event was followed by communal riots and government imposed state emergency. Secondly covid-19, which shutdown the whole world, how Sri Lanka could remain unaffected from it?

2) Ruling government: (a) Gotabaya Rajapaksha, former president of Sri Lanka, as per his party manifesto cut down VAT(value added tax) to 8% from 15% three months before covid-19. Government's logic was by cutting down  taxes they can increase consumption but during lockdown consumption dropped drastically and revenue from present consumption fell down due to tax cut. As a result, public debt of Sri Lanka kept on increasing. In 2019, public debt of Sri-Lanka was 94% of GDP & it went to 119% of GDP in 2021.

 

(b) Organic agriculture: Sri-Lankan government want to shift to organic agriculture over next 10 years  of period but abruptly government take decision to ban synthetic fertilizers and pesticides nationwide to move towards organic farming. This decision added calamity, because due to avoiding synthetic pesticides and fertilizers there crop yield became low and it made them forced to import food crops which one time they were self sufficient of producing.

3) Foreign debt: In 2017, the island's total debt stands at $64 bn and about 95% of all government's revenue spend in debt repayment. In march 2020, Colombo had imposed a broad import ban to save foreign currency needed to service it's $51 bn in foreign debts. But this had led to widespread shortages of  essential goods and sharp price rises. Sri Lanka also raised $1.3 bn for making of Hambantota international port from china in 2010. This port had to face heavy losses and Sri Lanka didn't able to repay the loan and later in 2017 lankan government gave this port to a Chinese firm on lease of 99 years.

Latest update as on Dec 2022: (a) Sri Lanka earns over USD 1129 million this year as a revenue         through tourism. It is due to an impressive 42% rise in number of tourists.

 (b) Sri Lanka held talks with the international monetary fund on OCT 16 on the release of a USD 2.9 bn rescue package by the fund, the completion of which hinged on assurances from the country's creditors on debt restructuring.

(c) Sri Lankan inflation jump to 70.2% amidst worst ever economic crisis. National consume price Index (NCPI) grew by 2.5% in august with food prices rising 1.7% and non foods rising 3.2%. Non food inflation surged to 57.1% in August and there was a sharp hike in electricity tariffs.

Is it an end of era for theatre business due to the emergence of OTT Platforms?

Most of the people fill with nostalgia by visualizing there past experience in theatre, their favourite movies experience which gives goosebumps, a sense of thrill or romanticism. But now questions are raising on the survival of the theatre industry. And its main reason is emerging market of the OTT platforms. But, Is there a real danger to theatre industry from OTT platforms? For answer to this question we have to take analytical approach towards both the industries.

Lets have a look what 2022 statistic says for both the industries in india. According to a report published by Media Partners Asia (MPA), the Indian OTT streaming video market is currently in its second growth phase with total revenues of $3 billion in 2022. So far, OTT has captured 7-9% of the entertainment industry’s share and revenue. With over 40-odd players offering original content in all languages, the industry is expanding quickly and consistently. There are currently over 45 million OTT subscribers in India. This figure is expected to reach 50 million by the end of 2023. The OTT market is set to become a ₹12,000-crore industry by 2023 at a compound annual growth (CAGR) of 36% (from ₹2,590 crore in 2018). 

India's gross box office statistics reached Rs 4,002 crore in the four months to April 2022, signaling the best-ever performance post Covid despite the impact of the third wave and the closure of a number of cinemas. It was also the first time that the monthly average box office exceeded Rs 1,000 crore.

As we are comparing here two different industries working in the same realm i.e. OTT platforms and Theatres, we should have a look on their differences in working. Over the top (OTT) platforms not only releases movies and shows on their respective platforms but also produces the movies and shows under the category of 'originals'. For this they also make tie-ups with the respective countries production houses, as in india Netflix announced an exclusive deal with red chillies entertainment. But in case of theatres, they have to project the films in their theatres and there major costing goes in the maintenance of theatres and salaries of the employees. so the challenges before them are different and varied in nature. 

OTT platforms has gained popularity in the time of covid-19 when everyone was locked in their homes. People find there entertainment space in OTT platforms. Theatre face a major setback while covid times. Even OTT industry is not untouched. Even though in the short term the OTT industry has witnessed huge growth in viewership as well as subscribers, the service providers are fearful of the fact that content is limited and the production has just resumed – which paired with the recession which is a proving to be a huge threat, might ultimately lead to un-subscriptions in huge numbers. This in turn is feared to lead to major job cuts and erosion of margins of profit once content dries up in the day and age wherein content is touted to be the “king”.

A study by the Boston Consulting Group indicates projection that the OTT media industry in India, which stands at 0.5 billion dollars as on 2018, would see a surge in growth and reach 5 billion dollars by the year 2023.

Several factors contributing to the OTT platforms increasing market are as follows:

1. Increasing internet connectivity.

2. Variable pricing models which made suitable of varying budget of customers.

3. Quality of content it provide to the users.

So one obvious question one may raise, Is it a end of theatre era? Probably not. According to experts, the audience has a sentimental as well as emotional attachment to the whole experience of the theatres and cinema which started from their childhood. The environment it provide based on state of the art sound quality, 3D, 4D effects cannot be achieved on OTT platforms. It is reflected in recent revenues of theatres also.

so, both of the medium are holding their selling points for now. This is because of their customer base which has of divergent needs.