As the Covid-19 pandemic has brought businesses and trade across the world to a standstill, India is also immune to it. While India’s economy was already suffering through a longer-than-expected slowdown, taking the country’s GDP to over 6-year low, the coronavirus effect has emerged as a double-edged sword for the economy. “The impact on the Indian economy could be significant if the virus continues to penetrate the country which will have a longer-lasting effect,” said a report by Care Ratings. The results could be more damaging if there is any shutdown in India, it added.
A survey conducted by Care Ratings reveals that India’s GDP could reduce by around 0.5 per cent and the fiscal deficit may widen if the government announces fiscal measures to support the economy. Also, the RBI is likely to respond by reducing the repo rate by 25 or 50 basis points either before or on April 2020.
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However, a few industries are also expected to be benefitted from the present condition. Among the industries, drugs, and pharma, healthcare are to benefit while the hospitality and tourism, and the aviation industry are expected to be hampered.
The retail inflation that has already swelled beyond the RBI’s comfort level of 2-6 per cent is further expected to pick up by June 2020. Among the other expectations due to coronavirus, a further contraction in India’s exports and imports in 2020-21; fall in global commodity prices; import substitution in drugs and pharma, electronics, and textiles; pressure mounting on rupee; and further pressure on the NPA level in the banking system; are included. In a press conference held yesterday, RBI Governor Shaktikanta Das said that the uncertainty due to the current pandemic can not be precisely gauged.