Six economic sectors may find rough road ahead, likely to take more than a year to recover

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Published: June 18, 2020 6:41 PM

NBFCs, real estate, hospitality & tourism, retail (excluding essential goods), airport allied services, and seaports are the sectors that are likely to take more than a year to heal the wounds of coronavirus pandemic.

weak economic sectors, economic stress, gdp growth, economic recoveryThe report also listed six major roadblocks created by the lockdown, which are sharp fall in revenue and profits; labour migration; liquidity crisis; low capacity utilization; and disruption in logistics.

Even as the Indian economy gradually recovers from the impact of the nationwide lockdown, six sectors may have to wait for a long time to see the signs of revival. NBFCs, real estate, hospitality & tourism, retail (excluding essential goods), airport allied services, and seaports are the sectors that are likely to take more than a year to heal the wounds of coronavirus pandemic, said a report by Care Ratings. The report also listed six major roadblocks created by the lockdown, which are sharp fall in revenue and profits; labour migration; liquidity crisis; low capacity utilization; and disruption in logistics.

The coronavirus pandemic has introduced a short-term contraction of demand and supply, sling with the structural shift resulting in a long-term impact on the industry. The impact of COVID-19 on India Inc would be prolonged and accentuated for the small and mid-sized corporate sector and the financial services sector, the report added. However, efforts made by the Modi government are expected to reduce some pain from the economy.

Also Read: India’s economy may shrink sharply in FY21 but here’s why GDP growth is likely to skyrocket in next fiscal

Financial services sector

The financial services sector including the NBFCs and banking sector are expected to take a long-term hit as they were already impacted by the sub-optimal GDP growth of the last two years, followed by the liquidity crisis. Adding to the woes, the option of moratorium and its extension is further expected to shoot up NPAs for the sector.

Weak annual GDP projections

Care Ratings has also projected the GDP to contract up to 5 per cent in the current fiscal year. The downgrade in the Indian economy’s growth forecast has been further attested by the Asian Development Bank and Fitch Ratings. While ADB today said that India’s economy may contract by 4 per cent in the current fiscal, Fitch ratings said that it may contract by 5 per cent.

Meanwhile, the Care Ratings report also highlighted that four sectors including pharmaceuticals, retail (essential goods), renewable energy, and power transmission will recover to the pre-Covid levels within three months. It added that other sectors such as banks, roads, steel & iron products, auto, etc may take three to twelve months to recover.

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