Coronavirus Impact: Indian Economy To Take Hit As Covid-19 Outbreak Jolts Businesses, Says FICCI

Coronavirus outbreak has assembled new roadblocks for the Indian economy now, causing severe disruptive impact on both demand and supply side elements which has the potential to derail India’s growth story.

Tourism, hospitality and aviation are among the worst affected sectors that are facing the maximum brunt of the present Coronavirus pandemic. (Getty Image)

New Delhi: The rapid outbreak of deadly Coronavirus pandemic in the country has not only led to a panic-like situation amongst the citizens, but has also hit Indian economy - which was already reeling under a significant slowdown over the past few quarters. The medical rampant has presented fresh set of challenges for the country's economy, causing severe disruptive impact on investment and consumption demand. Country's economy, which was growing at a six-year low rate of 4.7 per cent in the third quarter of the current fiscal, had strong hopes of recovery in the fourth quarter. However, the new Coronavirus epidemic has made the recovery extremely difficult in the near to medium term. According to a survey conducted by industry body FICCI, the outbreak has assembled new roadblocks for the Indian economy now, causing severe disruptive impact on both demand and supply side elements which has the potential to derail India’s growth story. Impact Of Covid-19 On Demand Side As per FICCI survey, tourism, hospitality and aviation are among the worst affected sectors that are facing the maximum brunt of the present Coronavirus pandemic. Closing of cinema theaters  and declining footfall in shopping complexes have affected the retail sector by impacting consumption of both essential and discretionary items. Consumption is also getting impacted due to job losses and decline in income levels of people, particularly the daily wage earners due to slowing activity in several sectors including retail, construction, entertainment and others, the survey stated. With widespread fear and panic rapidly increasing among people across the country, overall confidence level of consumers has dropped significantly, leading to postponement of their purchasing decisions. Even the travel restrictions imposed by Central government to prevent the spread of Covid-19 in India have severely impacted the transport sector. Impact of Covid-19 On Supply Side Large scale shutdown of factories and resulting delay in supply of goods from China have affected many Indian manufacturing sectors. According to the FICCI report, sectors like automobiles, pharmaceuticals, electronics, chemical products etc. are facing an imminent raw material and component shortage. Besides having a negative impact on imports of important raw materials, the slowdown in manufacturing activity in China and other markets of Asia, Europe and the US is impacting India’s exports to these countries as well, the report added. Impact Of Covid-19 On Financial Market Greater uncertainty about the future course and repercussion of Covid-19 has also made the financial market extremely volatile, leading to huge crashes and wealth erosion, which in turn is impacting consumption levels, FICCI report said. One of the massive crashes of domestic equity market was seen on March 12, when following the trend of the global equity markets, both the BSE Sensex and NSE Nifty crashed by more than 8 per cent in a single day. An estimated Rs 10 lakh crore of market cap was reportedly wiped off due to this single day fall. The fall has continued till date as investors resorted to relentless selling amid rising cases of Coronavirus. With equity markets likely to remain volatile in future as well, further wealth erosion of investors is expected. Growth Projections Revised Down The Coronavirus pandemic has also pulled down India's economic growth projections. Given the challenges that the businesses and people are facing currently, the Indian economy is most likely to experience a lower growth during the last quarter of the current fiscal, the report claimed. It is also being said that in case the spread of Coronavirus continues, India's growth may remain subdued in the first quarter of FY 20-21 as well. Rating agency Moody's Investors Service has revised down its growth forecast for India to 5.3 per cent for 2020 from its earlier estimate of 5.4 per cent made in February. According to the Health Ministry data, the COVID-19 cases in India rose to 195 on Friday after 22 fresh cases were reported from various parts of the country.