Coronavirus pandemic could shave off 0.5% of India's GDP: CARE survey

Majority respondents who believe that the RBI will reduce the repo rate, expect a cut between 25 and 50 bps either before or in April 2020

India's gross domestic product (GDP) will reduce by around 0.5 per cent on account of the coronavirus outbreak across the country, says CARE Ratings in a survey ‘Impact of the Corona Virus on the India Economy’. The survey covered over 150 participants—including industry stakeholders like c-suite executives, analysts, investors, economists—across sectors such as manufacturing, financial services and banking.

 

Majority respondents who believe that the RBI will reduce the repo rate, expect a cut between 25 and 50 bps either before or on April 2020. Fiscal deficit may widen if the government announces fiscal measures to support the economy. Drugs and pharma are seen as the top beneficiaries due to the global spread of the virus followed by healthcare and FMCG. On the flip side, hospitality and tourism, along with airlines and auto and auto ancillary are likely to have an adverse impact.

 

Also, 58 per cent of the 103 respondents expected India's exports to further contract in the next financial year while 78 per cent of them predicted a contraction in imports too.

 

As per the responses, global commodity prices are seen falling. More than half of the stakeholders forecasted an upward pressure on retail inflation by June 2020. Also, 57 per cent expect the epidemic to provide a boost to the domestic industry by way of import substitution or opening up of new import or export markets. Pharmaceuticals, textiles and electronics are likely to be top beneficiaries from this potential business opportunity, the survey said.

 

Moreover, the rupee is expected to remain under pressure, and NPA level in the banking system may see further upward pressure.

 

Compiled by Sai Ishwar