But says if there is quick retraction by mid-May, India may see GDP growth between 5.3% and 5.7%
Hyderabad: If the Covid-19 pandemic spreads further and the lockdown continues, then India’s growth may fall below 3 per cent, a report said on Saturday. However, it informs that if there is quick retraction across the globe including India by end of April or mid-May then the GDP for 2020-21 may be in the range of 5.3 per cent to 5.7 per cent.
KPMG’s report also mentions if India is able to control the spread of Coronavirus and there is a global recession, then the GDP is expected to be in the range of 4-4.5 per cent. The report also mentions that India’s real GDP decelerated to its lowest in over six years in third quarter of 2019-20 and the outbreak of Covid-19 posed a fresh challenge.
It said, “The nation-wide lockdown have brought economic activity to a standstill and could impact both consumption and investment. While Indian businesses, barring a few sectors, can possibly insulate themselves from the global supply chain disruptions due to relatively low resilience on intermediate imports, their exports to Covid-19 infected nations could take a hit. In sum, the three major contributors to GDP – private consumption, investment and external trade – will get affected.”
The report also added that abrupt stop of urban activity could lead to a steep fall in consumption of non-essential goods. The impact could be even more severe if domestic supply chain disruption caused by the 21-day lockdown were to affect the availability of essential commodities. Informal workers from non-agriculture sector will face uncertain income.
Sector-wise the report said that apparel and textile are expected to decline 10-12 per cent in the April-June quarter with cotton prices expected to take the maximum hit. For auto and auto components sector, the report informed that demand will continue to be muted for passenger vehicles and two/four-wheeler segment. Auto components sourcing might get dearer due to disturbance in supply chain across the globe.
The tourism and travel industry was first to be hit and the report says that the industry is staring at a potential job loss of around 38 million, which is around 70 per cent of the workforce. For the building and construction sector, the report predicts muted demand with significant reduction in new launches and also mentions that fresh equity investments into the real estate sector would slow down.
The petrochemical prices are expected to remain low on account of muted crude oil prices and the cascading impact on petrochemicals combined with uncertain domestic and global demand. However, the report mentions that since food and agriculture are the backbones of the nation and part of the government’s announced essential category, the impact is expected to be lower on both primary agricultural production and usage of agri-inputs such as seeds, pesticides, and fertilisers.