The PwC report also noted that the health situation continues to be dynamic with the continuing spread of the virus. "This has created a direct shock to the economy resulting in a recession," it said.
An early discovery of COVID-19 vaccine will be a source of confidence but its delivery to over a billion people might take time, according to a report by accountancy firm PwC India on the revival of economic growth.
Containing coronavirus is an important first step for economic revival. India, with 18 per cent of the global population has 9 per cent of COVID-19 cases and 5 per cent of global fatalities at the end of July.
“An early and decisive lockdown enabled India to ramp up its health care infrastructure – increasing the rate of testing per day 30-fold and hospital beds were increased by 50 per cent since the crisis took hold,” said the report titled ‘Full Potential Revival & Growth – Charting India’s medium term journey’.
However, reverse migration of workers led to the virus reaching smaller towns and districts, it said.
“An early vaccine discovery in a country with a strong vaccine production and distribution infrastructure, is a source of confidence, but delivering it to over a billion people will take time.
“Until that happens, health recovery will rest on testing and tracing at scale combined with social communication, awareness and collaboration,” said the nearly 130-page report.
Addressing the nation from the ramparts of Red Fort on the Independence Day, Prime Minister Narendra Modi said mass production of vaccines for COVID-19 will begin in India once scientists give their nod, and a road map is ready to ensure it reaches everyone in the country in the shortest possible time.
The prime minister said three vaccine candidates are in different stages of trials in the country, adding that the talent of our scientists is like that of “rishi munis”.
The PwC report also noted that the health situation continues to be dynamic with the continuing spread of the virus.
“This has created a direct shock to the economy resulting in a recession,” it said.
On the economic impact of COVID-19, it said the exogenous supply and demand shock due to the COVID-19 pandemic is likely to cause a recession for the first time since 1979.
It has affected the country’s aggregate supply due to lockdown measures, worker migration and disrupted supply chains.
It has also impacted aggregate demand due to loss in spending ability, the report said, which outlines key themes and an execution approach in nine key sectors that “can achieve significant economic uplift” over the next three years.
PwC said the report is based on interviews with business, public sector and citizen leaders, sectoral analysis, and a countrywide survey.
The global accountancy firm said nine key sectors that make up 75 per cent of pre-pandemic GDP (gross domestic product) and MSME segment were analysed in the report.
The consumer and retail, health and pharma, automotive and industrial products sectors will be influenced largely as consumer demand shifts to create new products and services influenced by wellness, safety and health.
Opening up of power and mining, infrastructure and logistics, information technology and education sectors will influence seamless flow of data, thereby enabling the core infrastructure and resources to become friction free, it said.
The financial services sector freeing up will ensure robust capital flows in the economy; while the government sector is a key enabler, and during the coming few years, it will also be a direct stimulus provider.
The report added that predicting a revival is difficult but it cites a recent PwC CXO Survey as well as a wider consumer survey done across 1,500 people from across the country, which indicates that the most likely horizon for the economic revival is the second quarter of 2021-22.
“This will depend on the control of the contagion and the discovery and administration of a vaccine,” it said.
The report further stated that the government stimulus of Rs 20 lakh crore and reforms under the Aatmanirbhar Bharat targeted the lower and middle strata. The focus on MSMEs, food supply and the direct benefits transfer (DBT) is addressing the stress on employment, migration and creating a safety net for the vulnerable, with technology a key facilitator to target and transfer funds.
Government spending on infrastructure, including health, is expected to help pump-prime the economy beyond the stimulus.
“We estimate that government spending will rise from the current 11.8 per cent GDP to 5-7 per cent extra, tapering back in FY23 and beyond,” it pointed out.
According to the report, unemployment has recovered from the high of 24 per cent but is still untenable at 11 per cent.
“Employment recovery will be a critical measure of success in the revival and growth phase,” according to the report.