The pace of economic revival crucially depends on how quickly the health concerns abate, economic activities restart, and the psychological impact of COVID-19 subsides, says a report.
According to Dun & Bradstreet's Economy Forecast, demand will only materialise once the economic activity gathers momentum.
"While an increase in the e-commerce activity indicates some tentative revival in pent-up demand, the expected decline in investment activity can be a drag on growth," said Arun Singh, Global Chief Economist, Dun & Bradstreet.
Singh further said: "The efforts taken by the government to generate employment in order to support demand through its emphasis on 'localisation of products' and infrastructure building along with other initiatives will yield results only over the next year."
According to the report, an increase in the e-commerce activity indicated that manufacturers have increased their production activity, although the manufacturing index under Index of Industrial Production (IIP) is expected to post a negative growth over the next two months at least, i.e. till September.
"The festival-related demand might pose some buoyancy to the industrial activity from October 2020, although the magnitude will remain lower, as compared to the last year," it said.
Dun & Bradstreet expects IIP to have fallen by (-) 10.5 per cent to (-) 11.5 per cent during July 2020.
Singh said the extent of COVID-19 disruption has been much worse than earlier anticipated. "Government finances remain constrained. Defaults and bankruptcies in the private sector are yet to unravel. Q1 2021 GDP growth is expected to be largely impacted by the strict lockdown measures," he said.
Meanwhile, Dun & Bradstreet's Business Optimism Index for July-Sept 2020 touched at an all-time low. Furthermore, Reserve Bank of India's (RBI) Consumer Confidence Index had also dipped to an all-time low in July.
"The third quarter of the fiscal 2021 is also expected to be impacted to an extent by the subdued festival related demand," he said.