India's GDP growth rate could be lower than expected in FY21 if COVID-19 spreads further, a report said. India's growth may fall below 3 per cent if the virus spreads further in India and lockdown sees an extension, the report by KPMG India said.
In case of a quick retraction of COVID-19 pandemic across the globe including India by April-end to mid-May, India's GDP growth may be recorded in the range of 5.3 per cent to 5.7 per cent, KPMG India added. In a scenario where India controls the virus spread but there's significant global recession, the growth may be in between 4 per cent to 4.5 per cent.
Even as a few sectors could insulate themselves from the global supply chain disruption owing to COVID-19 outbreak due to relatively lower reliance on intermediate imports, exports to infected nations could be hit, a report said. The lockdown is expected to have the most significant impact on the consumption sector.
"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," the report added. Supply chain restrictions and expected labour migration may be other impediments for the recovery of the petrochemical sector.
Among the major sectors textile and apparel production is likely to fall by 10 per cent to 12 per cent in the April-June quarter of FY21. The sourcing of auto components may get costlier owing to a disturbance in the supply chain across the globe, the report said. However, the Indian auto component industry may recover in the medium to long term as an alternative source of supply, it also said.
The Indian tourism and hospitality industry may see a potential loss of nearly 38 million, nearly 70 per cent of the total workforce. The housing sector may see weak demand with a significant reduction in the new launches.
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. The retail financing industry, one of the key drivers for credit growth in the banking and NBFC sector, will be impacted for at least two quarters, KPMG India also said.
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. However, the migratory labour movement holds significance in such a scenario. Meanwhile, India is under a 21-day lockdown to counter the spread of deadly COVID-19 pandemic until April 14.
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