COVID-19 pandemic 'severe demand shock' for Indian economy: D&B

The coronavirus pandemic is a "severe demand shock" for the Indian economy and could lead to further moderation in the country's GDP growth as the coronavirus-induced lockdown is causing significant disruption across multiple sectors, says a report.

According to Dun & Bradstreet, besides the impact on human lives and global supply chain, the pandemic is a severe demand shock which has offset the green shoots of recovery of the Indian economy that were visible towards the end of 2019 and early 2020.

"A fall in the optimism levels amid heightened uncertainty has led to a double whammy' closure of businesses leading to global supply chain disruptions and a steep fall in the consumption," said Arun Singh, chief economist at Dun and Bradstreet India.

Accordingly, Dun & Bradstreet has revised its Gross Domestic Product (GDP) estimates for India downwards by 0.2 percentage points for fiscal year 2020 to 4.8 per cent and by 0.5 per cent for fiscal year 2021 to 6 per cent.

"However, the extent of actual impact would depend on the severity and duration of the outbreak, which is still unknown," D&B said.

According to the report, the three major channels of impact for Indian businesses are legal linkages, supply chain and macroeconomic factors.

Dun & Bradstreet data shows that at least 6,606 Indian entities have legal linkages with companies in countries with a large number of confirmed COVID-19 cases.

"A slowdown in business activity in the foreign markets implies a negative impact on the topline of these companies," the D&B report said.

The impact of COVID-19 would be felt across sectors such as logistics, auto, tourism, metals, drugs and pharmaceuticals, electronic goods, MSMEs and retail among others, the report said.

Singh further said the COVID-19 pandemic threatens to disrupt the global economy with fears of recession looming in many countries and has also resulted in acute market volatility across the globe, reflecting the unprecedented uncertainty of the situation.