The repercussions of Covid-19 pandemic will be devastating in the coming years. It’s difficult to imagine how can a microscopic creature in the range of kilobases can create such widespread chaos. According to reports, economic growth can take a hit of up to half the point for the year 2021. The economy is forecast to grow 5% in current fiscal, the slowest in 11 years. Another official said, ‘There will be a hit of 0.3-0.5% on the GDP in the next fiscal year.’
However, these are just an estimate. The Reserve Bank of India Governor Shaktikanta Das said, ’India is relatively insulated from the global value chain and to that extent impact on India will be less.’ Considering the current situation things are pretty much under control, yet, things can go wild in the coming days.
The most affected sectors will be tourism, aviation, hospitality and trade, which will face the first brunt of the severe travel, assembly and activity curbs imposed by the governments across the world, followed by a wider impact on other sectors as economic activity stalls. No doubt, the ‘supply-side contagion effect’ will impact manufacturing, agriculture and the pharmaceutical industry.
Madan Sabnavis, Chief Economist at CARE Ratings Ltd said, ‘By first quarter in the next fiscal, we can definitely see a shaving off of at least half a per cent of GDP, which could go up to 1% depending on how much it permeates through the economy.’
Also, DK Srivastava, Chief Policy Adviser at Ernst & Young aid the impact would be limited to a 0.5 percentage point downward revision in the current and next quarter if the situation was contained within a month. However, if it dragged on till May, then GDP growth in for the year 2020 could dip to 4%. Going by the number, it would be hard to digest the growth rate will plunge down to that of the year 2000.
To sum up, India may not suffer as much, given that it has a smaller exposure to the global economy, exports of services and goods are only a fifth of the total economy. Lower oil prices will provide a cushion, boosting government revenue and creating room in household budgets.