External risks have risen significantly and pose a further downside risk to global growth and the negative impact on India’s trade is obvious.
Green shoots of economic revival that had started to pop up after a phase of prolonged economic slowdown, are once again lost under the cover of coronavirus. The novel coronavirus (Covid-19) has cast a long shadow over a much-anticipated mild recovery in the Indian economy in fiscal 2021. “We expect the Indian economy to grow at 5.2 per cent in FY21, with risks tilted to the downside,” said a report by CRISIL. External risks have risen significantly and pose a further downside risk to global growth and the negative impact on India’s trade is obvious, it added.
As the present condition hints about an upcoming recession in the US and Eurozone, the demand is expected to be weaker in China, Europe, the Middle East, and the US for most of the first half of 2020, which may impact the exports from India in the coming fiscal. The report suggests that the external factors are casting a bigger shadow on the Indian economy while the impact on domestic macros is expected to be limited.
Meanwhile, the credit quality pressures on India Inc have also been rising amid economic slowdown and slump in consumption is expected to intensify with the rising cases of Covid-19 in the country. The rise in coronavirus scare is also likely to impact demand and realisation in steel, gems & jewellery, construction & engineering, and textiles sectors. However, companies in sectors, such as pharma, power, and finance, that are domestically reliant and not exposed to significant demand pressures may not be impacted significantly. The impact will vary with sectors, and will be influenced by the extent of trade disruption, social distancing and the resultant economic slowdown, the report said.