Corona Virus Impact on Indian Economy – It will be unprecedented, it will be unavoidable and would take 9-12 months to enable the country to recover and be back to where it was before Corona virus outbreak. Let us have a detailed sector wise look at the corona virus impact on Indian Economy.
Corona Virus Impact on Indian Economy
Goldman Sachs now forecasts that India’s real GDP growth could fall to 1.6 percent in FY21 compared to its earlier projection of 3.3 percent, it said in a report titled An Unprecedented Sudden Stop for India. The research house has pared its growth forecast for the second time now. Before the local spread of Covid-19 accelerated, Goldman Sachs had pegged growth at 5.8 percent in FY21.
India’s lowered GDP growth forecast comes amid steep downgrades for global growth as well. Goldman’s forecasts suggest: Global GDP will contract by 2 percent United States GDP will contract by 6.2 percent Eurozone GDP will contract by 9 percent Explaining the contributors to the lowered growth forecast for India, Mishra said decline in global growth and the elasticity of India to this global slowdown would shave off 150 basis points from India’s real GDP growth. The local lockdown and a scenario in which there is a staggered exit would shave off 220 basis points from growth.
Sector Wise Impact of Corona virus on Indian Economy
Chemical Industry: Some chemical plants have been shut down in China. So there will be restrictions on shipments/logistics. It was found that 20% of the production has been impacted due to the disruption in raw material supply. China is a major supplier of Indigo that is required for denim. Business in India is likely to get affected so people securing their supplies. However, it is an opportunity. US and EU will try and diversify their markets. Some of the business can be diverted to India which can also be taken as an advantage.
Shipping Industry: Coronavirus outbreak has impacted the business of cargo movement service providers. As per the sources, per day per vessel has declined by more than 75-80% in dry bulk trade.
Auto Industry: Its impact on Indian companies will vary and depend upon the extent of the business with China. China’s business no doubt is affected. However, current levels of the inventory seem to be sufficient for the Indian industry. If the shutdown in China continues then it is expected to result in an 8-10% contraction of Indian auto manufacturing in 2020.
Pharmaceuticals Industry: Despite being one of the top formulations of drug exporters in the world, the pharma industry of India relies heavily on import as of bulk drugs. Due to the coronavirus outbreak, it will also be impacted.
Textiles Industry: Due to coronavirus outbreak, several garments/textile factories in China have halted operations that in turn affecting the exports of fabric, yarn and other raw materials from India.
Solar Power Sector: Indian developers may face some shortfall of raw materials needed in solar panels/cells and limited stocks from China.
Electronics Industry: The major supplier is China in electronics being a final product or raw material used in the electronic industry. India’s electronic industry may face supply disruptions, production, reduction impact on product prices due to heavy dependence on electronics component supply directly or indirectly and local manufacturing.
IT Industry: The New Year holidays in China has been extended due to coronavirus outbreak that adversely impacted the revenue and growth of Indian IT companies.
Tourism and Aviation: Due to the coronavirus outbreak, the inflow of tourists from China and from other East Asian regions to India will lose that will impact the tourism sector and revenue.
An outbreak of COVID-19 impacted the whole world and has been felt across industries. World’s second-largest economy China became standstill. Its outbreak is declared as a national emergency by the World Health Organisation. In India the three major contributors to GDP namely private consumption, investment and external trade will all get affected. World and Indian economy are attempting to mitigate the health risks of COVID-19 with the economic risks and necessary measures need will be taken to improve it.